On the exploitability of the turn-of-the-month effect–an international perspective

Abstract

Many empirical studies have found that patterns in stock index returns are seasonally related, which is contrary to the weak form of the Efficient Market Hypothesis (EMH). This article takes a closer look at the Turn-Of-the-Month Effect (TOME) and its economic relevance. By scrutinizing the exploitability and global persistence of the TOME, the ongoing discussion about the possibilities of using scientific research on seasonal anomalies for the creation of trading strategies is extended. This article is the first in the TOME literature to consider major non-US futures and to evaluate trading strategies using several risk-adjusted performance measures. Furthermore, it shows that an out-of-sample trading strategy based on the TOME is profitable in all studied futures, including when transaction costs and slippage are taken into account.

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