Turn of the Month Effect in the South African Equity Market: A GARCH analysis

Understanding calendar trends may aid in the identification of stock market return drivers and the making of smarter investment selections. The study's goal was to see if there is a turn of the month influence on the South African equity market. We analyse Johannesburg Stock Exchange (JSE) indices covering the period 1995 to 2018. The Generalized Auto Regressive Conditional Heteroskedasticity Model (GARCH), exponential GARCH (EGARCH) and threshold GARCH (TGARCH) models are used to model turn of the month anomaly. The mean equation results of the turn of the month displayed a positive effect for the aggregate and sectorial indices. The variance equation showed no turn of the month effect in the Top 40 and All Shares indices, though the Basic materials sector indicated a positive turn of the month effect. Investing in the telecommunications industry provides the best returns for the turn of the month method. Basic materials should be avoided by investors since it increases their exposure. In the South African equities market, the occurrence of the turn of the month impact invalidates the efficient market theory. We offer value by analysing turn of the month influence sectorial indices for Africa's largest stock market, in contrast to earlier research.