A Look at the "End of Month Effect"

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Here, we look at the "end of month" effect over a period of about 11 years (April 1993-May 2003). For those who aren't aware, the "end of month" effect is a supposed trend toward excess gains beginning on the last trading day of a month and ending 5 days into the new month. With our own list of about 2300 stocks, we derive average annualized gains of about 25% over those 6 days...nice, but far from spectacular. As a comparison, buying a motley selection of stocks in the fourth quarter has averaged about 20% annualized gains over the last ten years, with far lower transaction costs.

We've identified some indicators that improve on the 25% figure by a hefty margin, though the statistical significance isn't overwhelming in any of these cases. As seen below, the strategies you'd be using aren't particularly startling...go with volatile stocks, cheap stocks, and stocks with recent losses. We haven't identified any short strategies that improve on dart-throwing, so we certainly wouldn't suggest that anyone try to emulate the short strategies below.

Date(ymd): 990830
Average Gain: 572.46
Group Stdev: 878.06
high/low prob: 0.000, 0.002
Market Focus: 0.2 (0.1+0.2)
Market Focus5: -0.9 (-0.7+-0.2)
p = n = 1, r = 6, period = 30

Risk-adjusted data

Top Gaining Groups
4326.74 3monthgain 41.01 to 50.01 (5)+ move_ave5 1.00 to 11.00 (1)
4130.55 3monthgain 41.01 to 50.01 (5)+ momentum 1.00 to 11.01 (1)
3919.72 momentum 1.00 to 11.01 (1)+ break_ave 42.00 to 50.01 (5)
3835.62 yeargain 42.00 to 50.01 (5)+ move_ave5 1.00 to 11.00 (1)
3640.29 yeargain 1.00 to 11.01 (1)+ gain2 32.00 to 42.00 (4)
3533.97 high-close 22.00 to 32.00 (3)+ gain4 1.00 to 11.01 (1)
3516.97 slice97 12.00 to 22.00 (2)+ mov_ave100 11.01 to 21.01 (2)
3508.25 move_ave5 1.00 to 11.00 (1)+ vftotal 1.00 to 11.01 (1)
3450.13 recent_price 1.00 to 11.00 (1)+ big_vslice 1.00 to 11.01 (1)
3425.05 high-close 32.00 to 42.00 (4)+ volume3_10 42.00 to 50.01 (5)

Losing Groups
-2964.56 high-close 1.00 to 11.01 (1)+ break_ave 42.00 to 50.01 (5)
-2956.48 industry 87.41 to 101.61 (5)+ mov_ave100 41.01 to 50.01 (5)
-2922.95 pstdev 1.00 to 11.01 (1)+ break_ave 42.00 to 50.01 (5)
-2727.29 vstdev 1.00 to 11.00 (1)+ break_ave 42.00 to 50.01 (5)
-2686.98 pstdev 1.00 to 11.01 (1)+ stock_ind 31.01 to 41.01 (4)
-2681.74 industry 87.41 to 101.61 (5)+ break_ave 42.00 to 50.01 (5)
-2653.43 yeargain 31.01 to 42.00 (4)+ big_pslice 1.00 to 11.01 (1)
-2640.20 best_p 42.00 to 50.01 (5)+ momentum 31.01 to 41.01 (4)
-2443.75 t_vratio 11.01 to 22.00 (2)+ stock_ind 1.00 to 11.01 (1)
-2424.93 gain4 21.01 to 31.01 (3)+ break_ave 42.00 to 50.01 (5)

Date(ymd): 030529
Average Gain: 716.97
Group Stdev: 644.96
high/low prob: 0.040, 0.090
Market Focus: 0.3 (0.7+-0.4)
Market Focus5: -0.9 (0.1+-1.0)
p = n = 1, r = 6, period = 30

Risk-adjusted data

Top Gaining Groups
2942.90 move_ave5 5.00 to 7.01 (3)
2870.10 industry 1.23 to 10.06 (1)
2801.38 markcap_est 5.00 to 7.01 (3)
2645.97 move_ave5 3.00 to 5.00 (2)
2561.60 gain1 3.00 to 5.00 (2)
2522.19 break_ave 7.01 to 9.01 (4)
2485.38 gain4 7.01 to 9.01 (4)
2479.64 vstdev 48.00 to 50.00 (24)
2475.89 mov_ave20 3.00 to 5.00 (2)
2428.04 industry 68.02 to 72.10 (15)

Losing Groups
-1328.62 best_p 21.01 to 23.01 (11)
-1021.90 vstdev 38.00 to 40.00 (19)
-983.03 mov_ave20 50.00 to 50.01 (25)
-977.43 gain1 27.01 to 29.01 (14)
-967.60 ptot_neg 25.01 to 27.01 (13)
-907.62 vstock_ind 25.01 to 27.01 (13)
-904.12 pstdev 29.01 to 31.01 (15)
-900.44 industry 91.08 to 91.73 (22)
-890.42 gain3 44.00 to 46.00 (22)
-875.34 best_p 44.00 to 46.00 (22)

Date(ymd): 030529
Average Gain: 717.27
Group Stdev: 454.28
high/low prob: 0.002, 0.516
Market Focus: 1.2 (1.4+-0.1)
Market Focus5: -0.7 (-0.1+-0.5)
p = n = 1, r = 6, period = 30

Risk-adjusted data

Top Gaining Groups
2481.17 move_ave5 1.00 to 6.00 (1)
2353.58 mov_ave20 1.00 to 6.01 (1)
2020.56 gain1 1.00 to 6.00 (1)
2004.84 momentum 1.00 to 6.00 (1)
1798.21 industry 1.23 to 17.91 (1)
1773.33 markcap_est 6.01 to 11.01 (2)
1739.67 vstdev 47.00 to 50.01 (10)
1725.40 recent_price 1.00 to 6.00 (1)
1698.35 volume10_60 47.00 to 50.01 (10)
1677.76 gain2 32.00 to 37.00 (7)

Losing Groups
-339.61 gain3 42.00 to 47.00 (9)
-255.72 recent_price 42.00 to 47.00 (9)
-247.16 mov_ave20 26.01 to 32.00 (6)
-193.74 move_ave5 47.00 to 50.01 (10)
-166.99 ptot_neg 26.01 to 31.01 (6)
-130.19 momentum 47.00 to 50.01 (10)
-111.24 best_p 42.00 to 47.00 (9)
-105.29 break_ave 42.00 to 47.00 (9)
-99.78 mov_ave20 47.00 to 50.01 (10)
-92.65 yeargain 16.01 to 21.01 (4)

Date(ymd): 990830
Average Gain: 19.70
Group Stdev: 28.53
high/low prob: 0.000, 0.014
Market Focus: 0.8 (1.2+-0.4)
Market Focus5: -0.5 (0.3+-0.8)
p = n = 1, r = 6, period = 30

Top Gaining Groups
180.44 3monthgain 41.01 to 50.01 (5)+ momentum 1.00 to 11.01 (1)
177.26 3monthgain 41.01 to 50.01 (5)+ move_ave5 1.00 to 11.00 (1)
162.45 vstdev 41.01 to 50.01 (5)+ t_pratio 31.01 to 42.00 (4)
154.86 pstdev 41.01 to 50.01 (5)+ vkurt 12.00 to 22.00 (2)
154.74 1monthgain 41.01 to 50.01 (5)+ gain1 1.00 to 11.01 (1)
153.05 3monthgain 41.01 to 50.01 (5)+ gain1 1.00 to 11.01 (1)
141.47 recent_price 1.00 to 11.00 (1)+ big_vslice 1.00 to 11.01 (1)
140.72 volume10_60 11.00 to 21.00 (2)+ pave 42.00 to 50.01 (5)
139.98 gain1 1.00 to 11.01 (1)+ mov_ave100 41.01 to 50.01 (5)
138.99 yeargain 42.00 to 50.01 (5)+ move_ave5 1.00 to 11.00 (1)

Losing Groups
-83.19 close-low 41.01 to 50.01 (5)+ vslice3 21.01 to 32.00 (3)
-83.12 slice3 42.00 to 50.01 (5)+ vskew 42.00 to 50.01 (5)
-77.00 yeargain 31.01 to 42.00 (4)+ big_pslice 1.00 to 11.01 (1)
-72.02 pkurt 32.00 to 42.00 (4)+ vskew 42.00 to 50.01 (5)
-71.91 volume3_10 42.00 to 50.01 (5)+ big_pslice 1.00 to 11.01 (1)
-71.75 gain1 41.01 to 50.01 (5)+ vslice3 21.01 to 32.00 (3)
-70.61 vslice97 42.00 to 50.01 (5)+ pkurt 32.00 to 42.00 (4)
-69.95 yeargain 31.01 to 42.00 (4)+ gain3 42.00 to 50.01 (5)
-68.94 gain1 41.01 to 50.01 (5)+ big_vslice 32.00 to 42.00 (4)
-68.54 gain1 41.01 to 50.01 (5)+ volume10_60 31.00 to 41.01 (4)

Date(ymd): 030529
Average Gain: 24.89
Group Stdev: 22.69
high/low prob: 0.000, 0.010
Market Focus: 1.9 (1.4+0.5)
Market Focus5: 0.0 (0.5+-0.4)
p = n = 1, r = 6, period = 30

Top Gaining Groups
127.73 vstdev 48.00 to 50.00 (24)
124.45 recent_price 3.00 to 5.00 (2)
113.45 move_ave5 3.00 to 5.00 (2)
108.96 mov_ave20 1.00 to 3.00 (1)
106.67 momentum 1.00 to 3.00 (1)
106.23 pstdev 50.00 to 50.01 (25)
103.47 gain1 1.00 to 3.00 (1)
102.44 recent_price 5.00 to 7.01 (3)
100.11 gain1 3.00 to 5.01 (2)
98.90 industry 68.02 to 72.10 (15)

Losing Groups
-50.24 mov_ave20 50.00 to 50.01 (25)
-46.88 vstdev 38.00 to 40.00 (19)
-32.68 best_p 44.00 to 46.00 (22)
-32.48 vstock_ind 25.01 to 27.01 (13)
-29.82 move_ave5 50.00 to 50.01 (25)
-27.37 pskew 32.00 to 33.01 (16)
-26.89 pstdev 29.01 to 31.01 (15)
-23.85 t_vratio 19.01 to 21.01 (10)
-22.51 industry 91.08 to 91.73 (22)
-22.39 vstdev 23.01 to 25.01 (12)

Date(ymd): 030529
Average Gain: 24.91
Group Stdev: 17.34
high/low prob: 0.000, 0.324
Market Focus: 2.2 (2.2+-0.0)
Market Focus5: 0.8 (1.1+-0.4)
p = n = 1, r = 6, period = 30

Top Gaining Groups
108.27 move_ave5 1.00 to 6.00 (1)
98.76 vstdev 47.00 to 50.01 (10)
96.75 mov_ave20 1.00 to 6.01 (1)
92.87 pstdev 47.00 to 50.01 (10)
89.39 recent_price 1.00 to 6.00 (1)
88.68 momentum 1.00 to 6.00 (1)
87.00 gain1 1.00 to 6.00 (1)
75.94 ptotal 47.00 to 50.01 (10)
73.28 stdev 47.00 to 50.01 (10)
70.54 stdev 42.00 to 47.00 (9)

Losing Groups
-10.80 gain3 42.00 to 47.00 (9)
-6.01 move_ave5 47.00 to 50.01 (10)
-5.85 stock_ind 42.00 to 47.00 (9)
-5.75 slice97 1.00 to 6.01 (1)
-5.36 best_p 42.00 to 47.00 (9)
-4.76 mov_ave20 26.01 to 32.00 (6)
-3.39 vstdev 1.00 to 6.00 (1)
-2.84 volume10_60 1.00 to 6.00 (1)
-2.83 momentum 47.00 to 50.01 (10)
-2.65 pstdev 1.00 to 6.01 (1)