Does the stock market offer a predictable pattern of returns around the ends of calendar quarters? Do funds deploy cash to bid stocks up before quarter ends to boost portfolio values at the end of reporting periods (with subsequent reversal)? Or, do fund liquidity needs tend to drive stock prices lower before ends of quarters? Is the end-of-quarter effect the same as the turn-of-the-month effect? To address these questions, we examine daily stock market returns from 10 trading days before to 10 trading days after the ends of calendar quarters. We also compare daily returns with those for turns of calendar months. Using daily closes for the S&P 500 index since 1/3/50.
In summary, evidence suggests some weakness before ends of quarters and excess returns in the few days after ends of calendar quarters, but the effect is of low reliability and therefore risky to trade. The fourth quarter pattern is the most unique.
From CXO Advisory group
No comments:
Post a Comment