A Survey of Day of the Month Effect in World Stock Markets

Abstract

A curious seasonal anomaly found in finance is the turn of the month effect, where the daily mean return of stock market at the end of a month and beginning of a month is significantly higher than the average daily return of all the days of a month. There have been evidences that certain months in a year deliver significantly higher returns. Similar anomalies are found for week days also, where some days in a week deliver above average returns. Seasonal anomalies for researchers have been a subject of great interest and lot of literature is available worldwide. This paper examines presence of day of the month effect on eleven stock markets, geographically located in different corners of the world. This paper is not intended to study only the anomalies and inefficiencies present in various world markets, it is intended to highlight the profit potential available to individual investors and professional fund managers. The date wise daily returns are calculated in percentage terms to make the phenomena easy to understand. The statistical significance of daily returns is tested with ZStatistics, in total 341 hypotheses are tested in the research. To test the equality of returns on all days of a month we have used Kruskal-Wallis Test. We found day of the month effect present in all the stock markets tested across the world, some days in a month historically are found to have delivered significantly higher returns and there exists an opportunity to earn superior returns in the stock markets.