Turn-of-the-Month Effect Persistence and Robustness

Is the Turn-of-the-Month  (TOTM) effect, a concentration of positive stock market returns around the turns of calendar months, persistent over time and robust to different market conditions. Does it exist for all calendar months? Does it interact with the U.S. political cycle? Does it work for different indexes? To investigate, we define TOTM as the interval from the close five trading days before to the close four trading days after the last trading day of the month (a total of eight trading days, centered on the monthly close). Using daily closes for the S&P  500 Index during February 1950 through July 2011 (738 TOTMs) and for the  Russell 2000 Index during October 1987 through July 2011 (286 TOTMs), we find that: (more…)