Does the Turn-of-the-Month Effect Work for Sectors?

A reader inquired whether the Turn-of-the-Month  Effect, a concentration of positive stock market returns around the turns of calendar months, works for stock market sectors. To investigate, we measure turn-of-the-month (TOTM) returns for the nine sector exchange-traded funds (ETF) defined by the Select Sector Standard & Poor’s Depository Receipts (SPDR), all of which have trading data back to December 1998:

Materials Select Sector SPDR (XLB)
Energy Select Sector SPDR (XLE)
Financial Select Sector SPDR (XLF)
Industrial Select Sector SPDR (XLI)
Technology Select Sector SPDR (XLK)
Consumer Staples Select Sector SPDR (XLP)
Utilities Select Sector SPDR (XLU)
Health Care Select Sector SPDR (XLV)
Consumer Discretionary Select SPDR (XLY)

In an additional (shorter) test, we add measurement of TOTM returns for SPDR Gold Shares (GLD) as a proxy for gold. We define TOTM as the eight-trading day interval from the close five trading days before the first trading day of a month to the close on the fourth trading day of the month. Using daily dividend-adjusted closes for the sector ETFs and for S&P Depository Receipts (SPY) as a benchmark from 12/22/98 through 7/11/11 (151 months) and for GLD from 11/18/04 through 7/11/11 (80 months), we find that: (more…)