Article1990

Turn-of-Month Evaluations of Liquid Profits and Stock Returns: A Common Explanation for the Monthly and January Effects

252 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

ABSTRACT This paper presents and tests a hypothesis that the standardization of payments in the United States at the turn of each calendar month generally induces a surge in stock returns at the turn of each calendar month. The hypothesis also asserts that returns generally will be greater following the month of December and will vary inversely with the stringency of monetary policy. Empirical results using stock index returns for 1969–1986 support the hypothesis. This analysis provides an explanation for the previously documented monthly effect in stock returns and a partial explanation for the January effect.

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1987The Relation Between Price Changes and Trading Volume: A Survey 1983Size-related anomalies and stock return seasonality 1976Capital market seasonality: The case of stock returns 1988Are Seasonal Anomalies Real? A Ninety-Year Perspective 1983The anomalous stock market behavior of small firms in January 1987A monthly effect in stock returns 1988The Buying and Selling Behavior of Individual Investors at the Turn of the Year 2016INNOVATIONS IN INTEREST RATE POLICY

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1998The Impact of Options Trading on the Market Quality of the Underlying Security: An Empirical Analysis 2008Equity Returns at the Turn of the Month 2003The turn-of-the-month effect still lives: the international evidence 2012Are Monthly Seasonals Real? A Three Century Perspective 2003The declining January effect: evidences from the U.S. equity markets 2006Revisiting calendar anomalies in Asian stock markets using a stochastic dominance approach

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