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

Evangelos Vasileiou

International Journal of Banking, Accounting and Finance, 2023, vol. 13, issue 3, 388-402

Abstract: We examine the turn of the month effect (TOM) in cryptocurrency markets. In contrast to most calendar effect studies, we do not take for granted that the TOM period is the last trading day of the month up to the first three trading days (-1, 3), as Lakonishok and Smidt (1988) proposed in their seminal paper, but we employ an optimisation algorithm which tests several four-day intramonth periods. Our findings confirm the existence of the TOM effect because the most profitable four-day periods are those between the last days of one month and the first trading days of the next one [the (-1, 3) definition is included in these combinations]. We reach the conclusion that the existence of a TOM effect may not always lead to higher profits in comparison with a buy-and-hold (BnH) strategy, but it presents better returns to risk reward and it could be beneficial for investment strategies.

Keywords: turn of the month effect; TOM; calendar anomalies; Bitcoin; Ethereum; pricing efficiency; efficient market hypothesis; EMH; investment strategies. (search for similar items in EconPapers)
Date: 2023
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