The Turn-of-the-Month Anomaly in the Age of ETFs: A Reexamination of Return-Enhancement Strategies

Haiwei Chen; Chua, Ansley
April 2011
Journal of Financial Planning;Apr2011, Vol. 24 Issue 4, p62
Academic Journal
� We document that returns for the S&P 500 Index are higher during the turn-of-the-month (TOM) than the rest of the month. The TOM effect also exists in the ETF returns. � After the introduction of ETF trading, however, the TOM effect in the S&P 500 Index returns is concentrated on the first trading day of the month. � Contrasted with early studies by Hensel and Ziemba (1996) and Kunkel and Compton (1998), the strategy of switching from investing in T-bills during non-TOM days to investing in index funds during TOM days underperforms the strategy of buying and holding index funds in recent times. The strategy of switching from investing in index funds during non-TOM days to investing in ETFs during TOM days outperforms the strategy of buying and holding S&P 500 Index funds throughout the month. � The strategy of ETF buy-and-hold significantly outperforms the strategy of index fund buy-and-hold.


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