Turn-of-the-month Research Articles

Detecting anomalies in currency market of BRICS countries: insights into emerging economies

PurposeThe primary motive of the research paper is to investigate the efficiency of currency market of emerging economies (BRICS countries), by analyzing the presence and consistency of calendar anomalies – specifically the day-of-the-week (DOW) effect, the January effect and the Turn-of-the-month (TOM) effect. Daily data of around 23 years and 4 months were examined for the purpose of study. Segmented data of 8-year intervals were also analyzed to observe the changes in the pattern over a period. The findings are intended to offer insights into market behaviors and potential trading strategies for astute traders.Design/methodology/approachThe study employed a quantitative research design utilizing ordinary least squares regression with dummy variables and Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) (1,1) model. To study the calendar anomalies, the daily closing price of five currency pairs has been taken from Bloomberg’s software. The Kruskal–Wallis test was conducted to validate and check the robustness of analysis.FindingsThere are mixed results regarding calendar anomalies in the BRICS currency markets. Analysis of aggregate data revealed that DOW effect is present in all the currencies except USDZAR, with Monday showing positive return. The segmented analysis showed the presence of DOW effect in USDCNY and USDINR, while other currencies lacked consistent patterns. The January effect was evident for Indian Rupees and Chinese Yuan but not for other currencies. TOM effect was present only in Chinese Yuan. Overall, the Indian Rupee and Chinese Yuan displayed inefficiencies, indicating potential for trading strategies, while other currencies appeared efficient and lacked consistent patterns.Originality/valueThe literature on currency pricing anomalies is sparse, particularly in the context of developing and underdeveloped economies. While some research exists on anomalies within the currencies of developed nations, there is a significant gap in studies focusing on emerging economies. This paper seeks to address this deficiency by investigating the presence of calendar anomalies in the currencies of BRICS countries, providing new insights into the behaviors of these emerging economies.

On the (In)efficiency of gold and bitcoin: impact of COVID-19

PurposeWe aim to examine the impact of COVID-19 on the efficiency of Gold and Bitcoin returns. In particular, our efficiency tests are based on the popular calendar anomaly, the turn-of-the-month (TOM) effect in these markets.Design/methodology/approachWe define the TOM days as the final trading day of a month and initial three trading days of the immediate next month. To understand the TOM effect, we estimate the typical Ordinary Least Squares (OLS) regression model using the Heteroskedasticity and Autocorrelation Consistent (HAC) standard errors and covariances.FindingsThough in the full sample, a positive and significant TOM effect is observed only for Bitcoin, during COVID period, the TOM effect appears in Gold returns and becomes stronger for Bitcoin, implying that the considered securities become inefficient during COVID period.Practical implicationsBased on these results, we create a trading strategy which is found to surpass the buy-and-hold strategy for both the full sample as well as the COVID period for Bitcoin while only during the COVID period for Gold. Our results provide useful implications for investors and policymakers as the Gold and Bitcoin markets can be timed by taking positions especially based on the behavior of the TOM effect.Originality/valueWe examine the TOM effect in the two important securities – Gold and Bitcoin. Though, a few studies have examined this anomaly in currency, equity and cryptocurrency markets, however, they have not considered the Gold market. Additionally, no study has examined the impact of COVID-19 on the TOM effect in these markets, and hence, market efficiency. We believe that our study is the first to examine the TOM effect in these markets simultaneously.

Calendar anomalies and asymmetric volatility of returns in the Indonesian stock market: conventional vs Islamic indices

Purpose This study aims to identify calendar anomalies that can affect stock returns and asymmetric volatility. Thus, the objective of this study is twofold: on the one hand, it examines the impact of calendar anomalies on the returns of both conventional and Islamic indices in Indonesia, and on the other hand, it analyzes the impact of these anomalies on return volatility and whether this impact differs between the two indices. Design/methodology/approach The authors apply the GJR-generalized autoregressive conditional heteroskedasticity model to daily data of the Jakarta Composite Index (JCI) and the Jakarta Islamic Index for the period ranging from October 6, 2000 to March 4, 2022. Findings The authors provide evidence that the turn-of-the-month (TOM) effect is present in both conventional and Islamic indices, whereas the January effect is present only for the conventional index and the Monday effect is present only for the Islamic index. The month of Ramadan exhibits a positive effect for the Islamic index and a negative effect for the conventional index. Conversely, the crisis effect seems to be the same for the two indices. Overall, the results suggest that the impact of market anomalies on returns and volatility differs significantly between conventional and Islamic indices. Practical implications This study provides useful information for understanding the characteristics of the Indonesian stock market and can help investors to make their choice between Islamic and conventional equities. Given the presence of some calendar anomalies in the Indonesia stock market, investors could obtain abnormal returns by optimizing an investment strategy based on seasonal return patterns. Regarding the day-of-the-week effect, it is found that Friday’s mean returns are the highest among the weekdays for both indices which implies that investors in the Indonesian stock market should trade more on Fridays. Similarly, the TOM effect is significantly positive for both indices, suggesting that for investors are called to concentrate their transactions from the last day of the month to the fourth day of the following month. The January effect is positive and statistically significant only for the conventional index (JCI) which implies that it is more beneficial for investors to invest only in conventional assets. In contrast, it seems that it is more advantageous for investors to invest only in Islamic assets during Ramadan. In addition, the findings reveal that the two indices exhibit lower returns and higher volatility, which implies that it is recommended for investors to find other assets that can serve as a safe refuge during turbulent periods. Overall, the existence of these calendar anomalies implies that policymakers are called to implement the required measures to increase market efficiency. Originality/value The existing literature on calendar anomalies is abundant, but it is mostly focused on conventional stocks and has not been sufficiently extended to address the presence of these anomalies in Shariah-compliant stocks. To the best of the authors’ knowledge, no study to date has examined the presence of calendar anomalies and asymmetric volatility in both Islamic and conventional stock indices in Indonesia.

Indian Stock Market Regularity: The Turn of the Month Effect

Recent empirical studies have identified the presence of the Turn of the Month (TOM) effect on various stock markets. This effect is a yell-knoYn calendar anomaly in stock markets, characterized by higher returns and increased trading volume around the beginning of each month. The researchers have proposed several explanations for this anomaly, includ- ing factors such as increased liquidity, YindoY dressing practices, and neys announcements. This study focuses on investigating the TOM effect in the Indian stock market, specifically focusing on size of firms and trading activity by individual investors, as Yell as domestic and foreign institutional investors. We analysed the closing prices of four indices (Nifty 50, S&P BSE Sensex, Nifty SmallCap 50, and BSE SmallCap) from April 2007 to February 2023. Our analysis involved using parametric t-tests and non-parametric Mann-Whitney U tests to assess the significance of our findings. The results indicate that the TOM effect is indeed significant in the Indian stock market, Yith higher returns observed during the days surrounding the TOM. Furthermore, this effect is more pronounced in smaller indices com- pared to larger ones. Additionally, Ye found that domestic institutional investors engage in significant trading activity toYards the end of the trading month, Yhile individual investors do not demonstrate the same pattern. Foreign investors also exhibit notable differences in trading activity betYeen the TOM and the rest of the month.

Return-enhancing strategies with international ETFs


 
 
 We show that the average return over the four-day period surrounding the turn of the month is significantly positive in eight out of the nine international exchange-traded funds (ETFs). The strategy of buying-and-holding an ETF during turn-of-the-month (TOM) period and switching to holding T-bills during non-TOM period produces significantly positive monthly average returns. This ETF- T-bills switching strategy also has the lowest risk and highest Sharpe ratio and Sortino ratio than the traditional strategy of buying-and-holding either an index fund or an ETF. Investors pursuing this switching strategy generate a terminal value twice larger than the next best strategy of buying-and- holding an ETF.
 
 

Investigating the Turn of the Month effect: Evidence from International Financial Markets

Market anomalies are predictable patterns in financial markets that contradicts the efficient market hypothesis and the random walk theory. Several anomalies have been documented ever since the emergence of behavioural finance in the early 90s. The Turn of the Month anomaly is a well-known pattern that has resonates a lot of controversy in finance. Advocates of the Turn of the Month effect contends that stock market returns tend to be higher at the last few trading days of the month which spills over to the first two to three trading days of the following month. The aim of this study was to empirically investigate the Turn of the month effect before and during the Covid-19 pandemic so as to validate or repudiate the concept. This study used a sample period from June 30, 2017 to June 30, 2019 and January 1, 2020 to December 31, 2021 in the JSE, Nasdaq, CAC 40, DAX, BIST 100 and Nikkei 225. The findings revealed no evidence to support the TOM effect although some of the financial markets experienced higher returns at the end of the month such as the JSE and Nasdaq. Therefore, the Turn of the Month effect cannot be a trading strategy to realised abnormal returns than the market.

Analysis of anomaly turn of the month effect on stock return in the Indonesian capital market before and during the COVID-19 pandemic

This study aims to examine the presence of an anomaly in the turn-of-the-month effect in Indonesia before and during the COVID-19 pandemic. The population of this study are companies listed on the LQ45 index for the 2019-2021 period. Using the purposive sampling technique and obtained 36 samples of companies. This study will compare the average return and average abnormal return of each sample which has been grouped based on the turn of the month and the rest of the month both before and during COVID-19. This study used a different test, namely the paired sample t-test which was tested using the SPSS application. The analysis result provides evidence that there was an anomaly in the turn-of-the-month effect before COVID-19 and the effect disappeared when Indonesia experienced the COVID-19 pandemic. This study also found a difference in abnormal returns in the turn of the month before and during COVID-19 where the abnormal return value was higher during the COVID-19 pandemic.

Is the turn of the month an anomaly on which an investment strategy could be based Evidence from Bitcoin and Ethereum

Is the turn of the month an anomaly on which an investment strategy could be based Evidence from Bitcoin and Ethereum

Global mutual fund market: the turn of the month effect and investment strategy

Turn of the month (TOM) is a widely recognized anomaly and studied majorly in the context with equity markets. However, the global mutual fund market has not been much exposed to empirical testing of the TOM anomaly and the implication thereof. This study has dual objectives of not only investigating if the TOM effect persists in the world of equity mutual funds but also proposing an investment strategy to exploit the TOM anomaly to mutual fund investors. The study examines 40 equity mutual funds across 6 different geographies and 2 multi-geographic segments. For the sample period of 15 years (2005–2020), crucially covering financial crisis as well as an outbreak of the Covid-19 pandemic this study confirms a statistically significant effect of TOM for 23 out of 40 funds. Based on findings, the paper proposes a staggered investment strategy to investors in mutual funds for entry and exit to exploit the TOM effect for return enhancement.

The turn-of-the-month effect and investor trading activities in the KOSDAQ stock market

The turn-of-the-month (TOM) effect is observed as one of the seasonalities in many markets. The author examines the TOM effect in the KOSDAQ market and finds that the effect is significant. The TOM effect in the KOSDAQ market is not due to size, turn-of-the-year, turn-of-the-quarter or index rebalancing effect. The author also finds that individual and institutional traders do not trade and buy more stocks at the TOM than on the rest days, not consistent with existing explanations of the increased liquidity by individual investors or institutional window-dressing activity. When the author investigated the net buying volume and net turnover of each investor, the net volume and turnover of individual investors at the TOM were significantly lower than those on the other days, rejecting the hypothesis of their increased demand. Interestingly, net foreign volumes at the TOM are significantly higher than on the other days. Finally, using panel regressions, the author finds that stocks with a higher net buying volume of foreigners for the TOM period tend to have higher returns, while stocks with a higher net buying volume of individual traders for the TOM period are likely to have lower returns. The results confirm that the TOM effect is not due to the increased demand of individual investors. Instead, higher net buying volume by foreigners may partially cause the TOM effect. Therefore, this study contributes to the literature by revealing the presence of the TOM effect in the KOSDAQ market and the foreign role in the anomaly in the market even mainly traded by retail investors.

The turn-of-the-month effect and trading of types of investors

We examine the turn-of-the-month (TOM) effect in the Korean stock market, a representative emerging market in Asia. The returns show that the TOM effect is statistically significant and is not due to size or turn-of-the-year, turn-of-the-quarter, or index rebalancing effects. Although extant studies explain this effect as the result of individual investors' increased liquidity and institutional window-dressing, we find that individual and institutional traders do not trade and buy more stocks at the TOM than they do in the rest of the month (ROM). Moreover, the stocks that individual traders buy relatively more tend to underperform. On the other hand, foreign investors trade and buy more stocks at the TOM than they do in the ROM, and the stocks they buy more at the TOM tend to outperform. Therefore, foreign investors partially contribute to the TOM effect in the Korean market.

Turn-of-the-month effect in cryptocurrencies

Purpose This study examines the turn-of-the-month (TOM) effect in Bitcoin (BIT), Ethereum (ETH) and Litecoin (LIT) cryptocurrencies from August 2015 to August 2021.Design/methodology/approach Dummy regression model is used to examine the presence of the TOM effect and to test the efficiency of the cryptocurrency market. The characteristics of the returns during TOM days are compared with that of the non-non-TOM trading days. The authors also develop a trading strategy to earn abnormal returns using the TOM effect.Findings The authors show that TOM returns are positive and significantly higher than that of non-TOM returns. Interestingly, the authors empirically show that the TOM effect is not driven by the day-of-the-week (DOW) effect or the January effect. Based on the significant TOM effect, the authors formulate a trading strategy that annually outperforms the buy-and-hold strategy for BIT by 21.77% and for LIT by 47.10%. Finally, the results are robust to using a Generailzed Auto Regressive Conditional Heteroskedasticity (GARCH) (1,1) model and the January 2018 sell-off.Practical implications The results have important implications for both traders and investors. The findings suggest that the investors might be able to earn excess profits by timing their positions in BIT and LIT taking the advantage of the TOM effect.Originality/value First, the authors provide the only study to report the evidence of the TOM effect in three leading cryptocurrencies, viz., BIT, LIT and ETH. Second, the authors control for the DOW effect and the January effect while investigating the TOM effect in cryptocurrency market. Finally, this study develops a trading strategy based on which the investors can time the cryptocurrency markets as indicated by the pattern of the TOM effect during the studied time period.

Is the turn of the month an anomaly on which an investment strategy could be based Evidence from Bitcoin and Ethereum

Is the turn of the month an anomaly on which an investment strategy could be based Evidence from Bitcoin and Ethereum

Is the Turn of the Month an Anomaly on Which an Investment Strategy Could Be Based? Evidence From BitCoin and Ethereum

Is the Turn of the Month an Anomaly on Which an Investment Strategy Could Be Based? Evidence From BitCoin and Ethereum

Behavior of calendar anomalies and the adaptive market hypothesis: evidence from the Baltic stock markets

ABSTRACT This research tests the Adaptive Market Hypothesis (AMH) regarding calendar anomalies in the Baltic stock markets. Analysis of known calendar anomalies over time is carried out by using sub-sample GARCH (1,1) regression with Kruskal–Wallis statistics and rolling windows. Three calendar anomalies were confirmed in these markets: Friday, MoY (July and January), and ToM (turn-of-the-month). The Baltic stock markets demonstrated behavior supporting the AMH. It was found that the opportunity to earn abnormal returns on investment strategies based on Friday, July, and ToM effects disappeared during the financial crisis of 2007–9. The Friday and the ToM effects follow a more time-varying pattern, while the July effect is less so.

Calendar anomalies in the stock markets: conventional vs Islamic stock indices

PurposeIn this study, the authors evaluate seven calendar anomalies’–the day of the week, weekend, the month of the year, January, the turn of the month (TOM), Ramadan and Eid festivals–effects in both the conventional and Islamic stock indices of Bangladesh. Also, the authors examine whether these anomalies differ between the two indices.Design/methodology/approachThe authors select the Dhaka Stock Exchange (DSE) Broad Index (DSEX) and the DSEX Shariah Index (DSES) of the DSE as representatives of the conventional and Islamic stock indices respectively. To carry out the investigation, the authors employ the generalized autoregressive conditional heteroskedasticity (GARCH) typed models from January 25, 2011, to March 25, 2020.FindingsThe study’s results indicate the presence of all these calendar anomalies in either conventional or Islamic indices or both, except for the Ramadan effect. Some significant differences in the anomalies between the two indices (excluding the Ramadan effect) are detected in both return and volatility, with the differences being somewhat more pronounced in volatility. The existence of these calendar anomalies argues against the efficient market hypothesis of the stock markets of Bangladesh.Practical implicationsThe study’s results can benefit investors and portfolio managers to comprehend different market anomalies and make investment strategies to beat the market for abnormal gains. Foreign investors can also be benefited from cross-border diversifications with DSE.Originality/valueTo the authors’ knowledge, first the calendar anomalies in the context of both conventional and Islamic stock indices for comparison purposes are evaluated, which is the novel contribution of this study. Unlike previous studies, the authors have explored seven calendar anomalies in the Bangladesh stock market's context with different indices and data sets. Importantly, no study in Bangladesh has analyzed calendar anomalies as comprehensively as the authors’.

Turn-of-the-month effect, FX influence, and efficient market hypothesis: new perspectives from the Johannesburg stock exchange

ABSTRACT This paper examines the Turn of the Month (TOM) effect in the highly capitalized emerging South African stock market. We use data from the FTSE/JSE Afr8ica All Shares Index (JALSH) and the USDZAR FX market for the period 31.12.1998-31.12.201. We provide empirical evidence that TOM is present in the S. African stock market, but there is a non-TOM anomaly in the FX market. Thus, the S. African stock market enables us to gain new perspectives on the study of the TOM effect. Specifically, using an optimization algorithm, we are able to identify the optimal intra-month period in the JALSH by examining it in both the local currency (ZAR) and in USD. Moreover, we show that the performance in the USDZAR FX market has an impact: (a) on the domestic stock market’s performance (JALSH in ZAR), and (b) on the TOM effect. Finally, we present some practical investment strategies based on the TOM effect which can outperform the stock market and prove beneficial for investors trading in USD.

Demand and Willingness to Pay for Rice Commodities In West Java

Rice is the staple food of Indonesian people. In West Java, the price of rice in 2019 in the turn of the month increases gradually, therefore, more attention is needed regarding rice price stabilization. Price stabilization is an important dimension in contributing to social welfare stabilization. This study aimed to determine the factors that influence rice demand and consumers' willingness to pay for rice (Willingness to Pay) in West Java. The basic methods of this research were descriptive and analytical methods. The method of taking location was purposive and sampling was done by convenience sampling technique. Types of data and data sources were primary data and secondary data. Data collection techniques by interview, observation and recording. Data analysis methods used included: (1) Descriptive Analysis Method; (2) Analysis of factors that influence demand by using Seemingly Unrelated Regression (SUR); (3) Willingness to Pay (WTP). The results showed that the price of rice had a positive effect on rice expenditure, yet had a negative effect on rice demand. While the number of family members has a positive effect on rice demand. Calculation of value (WTP) obtained Gross WTP value of IDR 4,315,638.26. The amount to be paid is IDR 243,635.85, the Net WTP value is IDR 4,072,002.41. When prices increase by 10%. then the welfare level decreased by -67.89%. Meanwhile, when prices fell by 10%, the welfare level increased by 61.10%.

Turn-of-the-Month Effect, FX Influence, and Efficient Market Hypothesis: New Perspectives from the Johannesburg Stock Exchange

This paper examines the Turn of the Month (TOM) effect in the highly capitalized emerging South African stock market. We use data from the FTSE/JSE Africa All Shares Index (JALSH) for the period 31.12.1998-31.12.2018 and we provide empirical evidence that TOM is present in both the S. African stock market and the USDZAR FX. Thus, the S. African stock market enable us to gain new perspectives on the study of the TOM effect. Specifically, we are able to identify the optimal TOM period using an optimization algorithm either we examine the JALSH in local currency (ZAR) or in USD. Moreover, we show that the performance in the USDZAR FX market has impact: (a) on the domestic stock market’s performance (JALSH in ZAR), and (b) to the TOM effect. Finally, we present some practical investment strategies based on the TOM effect which can outperform the stock market and prove beneficial for investors in USD.

Lottery-type stocks and corporate strategies at the turn of the month

We show that retail investors’ cyclical demand for lottery stocks, which tends to peak at the turn-of-the-month (ToM), has implications for firms’ financial activities. Consistent with the notion that the peak in demand is driven by a propensity to gamble that is associated with inattention, we find underreaction to earnings news issued at the ToM by lottery-type firms located in areas with many gambling investors. Lottery-type firms are more likely to issue bad earnings news at ToM, thus benefiting from a less negative price reaction. Similarly, seasoned equity offerings (SEOs) by lottery-type firms are often strategically timed at the ToM, conceivably to take advantage of local retail investors’ underreaction and thereby temper the typically negative immediate stock price reaction to the issuance news. Further suggestive of strategic exploitation of local investors peak in demand at the ToM period, lottery-type firms’ SEOs at the ToM are also more likely to be offered via an accelerated method that saves the direct marketing costs associated with other offer methods.