The disappearing turn-of-month effect

Laura Han, Yufeng Han and Shirley Tian

Finance Research Letters, 2025, vol. 71, issue C

Abstract: We document that the turn-of-the-month (TOM) effect, historically a highly significant regularity where the market yields higher returns around the turn of the month, disappears entirely after 2001. The liquidity-based explanation proposed by Ogden (1990) no longer holds over the past two decades. We hypothesize and provide evidence that the drastic reduction in transaction costs after 2001 likely diminishes the TOM effect, by enabling arbitragers to trade against it more effectively and allowing investors to trade more frequently rather than concentrating their activity at the end of the month.

Keywords: Turn-of-month effect; Liquidity; Transaction costs; Decimalization; Market daily returns (search for similar items in EconPapers)
JEL-codes: G12 G23 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:71:y:2025:i:c:s1544612324014909

DOI: 10.1016/j.frl.2024.106461

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