SMA200 or TOTM (hold SPY above its 200-day SMA, otherwise only turn-of-month days, cash at other times) ranked first by CAGR and Sharpe ratio among four strategies including SPY buy-and-hold (Nov 1993–Jan 2024; daily; 0.1% one-way friction; pre-tax).
"Turn-of-the-Month Effect Persistence and Robustness" indicates that average absolute returns during the turn-of-the-month (TOTM) are strong for both bull and bear markets. Does a strategy of capturing all bull market returns and TOTM returns only during bear markets perform well? To investigate, we apply four strategies to SPDR S&P 500 ETF Trust (SPY) as a tradable proxy for the stock market:
SPY - buy and hold SPY.
SMA200 - hold SPY (cash) when SPY closes above (below) its 200-day simple moving average (SMA200) the prior day.
TOTM - hold SPY from the close five trading days before through the close four trading days after the last trading day of each month and cash at all other times (TOTM).
SMA200 or TOTM - hold SPY when SPY closes above its 200-day SMA the prior day and otherwise use the TOTM strategy.
We explore sensitivities of these strategies to a range of one-way SPY-cash switching frictions, with baseline 0.1%. Using daily dividend-adjusted SPY from the end of January 1993 through early January 2024 and contemporaneous 3-month Treasury bill (T-bill) yields as the return on cash, we find that:
Turn of the Year and Size in U.S. Equities PremiumIs there a material and reliable market capitalization (size) effect among U.S. stocks around the turn-of-the-year (TOTY)? To check, we track cumulative returns from…
U.S. Stock Market End-of-Quarter Effect PremiumS&P 500 quarter-end (QEND) 8-day windows showed modestly higher average returns than turn-of-the-month windows, with Q3 consistently weak across subperiods (daily closes, Jan 1928–mid-Aug…
Turn-of-the-Month Effect for Currencies? PremiumTurn-of-the-month (eight trading days centered on month-end) average abnormal returns for UUP, FXE and FXY versus all eight-day intervals were very small, with no…
Does the Turn-of-the-Month Effect Work for Asset Classes? PremiumAverage abnormal turn-of-the-month returns across 10 asset class ETFs (vs all eight-trading-day intervals) were 0.4% in first sample halves versus 0.1% in second halves…
Does the Turn-of-the-Month Effect Work for Sectors? PremiumAverage abnormal turn-of-the-month returns across nine Select Sector SPDR ETFs declined from 0.6% (first half) to 0.1% (second half) and 0.0% (last fourth) (Dec…
