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The disappearing turn-of-month effect

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  • Han, Laura
  • Han, Yufeng
  • Tian, Shirley

Abstract

We document that the turn-of-the-month (TOM) effect, historically a highly significant regularity where the market yields higher returns around the turn of the month, disappears entirely after 2001. The liquidity-based explanation proposed by Ogden (1990) no longer holds over the past two decades. We hypothesize and provide evidence that the drastic reduction in transaction costs after 2001 likely diminishes the TOM effect, by enabling arbitragers to trade against it more effectively and allowing investors to trade more frequently rather than concentrating their activity at the end of the month.

Suggested Citation

  • Han, Laura & Han, Yufeng & Tian, Shirley, 2025. "The disappearing turn-of-month effect," Finance Research Letters, Elsevier, vol. 71(C).
    • Handle: RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014909
    DOI: 10.1016/j.frl.2024.106461
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    References listed on IDEAS

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    More about this item

    Keywords

    Turn-of-month effect; Liquidity; Transaction costs; Decimalization; Market daily returns;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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