Turn of the month effect is the belief that most of the (positive) returns on st
ID: 2748691 • Letter: T
Question
Turn of the month effect is the belief that most of the (positive) returns on stocks occur at the turn of the month, which begins with the last trading day of the month and ends on the third trading day of the next month (a span of four days). To check this claim, assume that Ann invests $1000 initially. She buys the SP500 in the penultimate trading day of a month, close of business (cob). She sells in the third trading day of the next month, cob. What is her final wealth in the third trading day of October 2015 (cob), if she started investing in the last trading day of October 1999 (cob) according to the “turn of the month” strategy? Compare this to the final wealth under a “buy-and-hold” strategy, where she would invests $1000 in the SP500 in the last trading day of October 1999, do nothing afterwards, and sell eventually her shares in the third trading day of October 2015.
Explanation / Answer
S&P 500 as on October 29, 1999 = 1362.93
S&P 500 as on 5th October 2015 = 1987.05
Initial Investment = $ 1000
Final Wealth Based on Turn-of the month strategy = $ 1522.47
Final Wealth based on buy and hold strategy = ($1000/1362.93)*1987.05
= 0.7337 * 1987.05 = $ 1457.925
= $ 1457.93 (rounded off)
Details of calculation off turn-of-month strategy as below
S&P 500® Turn of the month strategy SPXSM Buy = 1000/indiex Sell = units * index Return % 29-Oct-1999 1362.93 0.733713397 3-Nov-1999 1354.93 994.1302928 -0.0064326 30-Nov-1999 1388.91 0.715762931 3-Dec-1999 1433.30 1025.903009 0.035025 31-Dec-1999 1469.25 0.698249453 5-Jan-2000 1402.11 979.022541 -0.0500787 31-Jan-2000 1394.46 0.702080046 3-Feb-2000 1424.97 1000.443003 0.0239775 29-Feb-2000 1366.42 0.732163612 0 3-Mar-2000 1409.17 1031.742998 0.0342862 31-Mar-2000 1498.58 0.688480427 0 5-Apr-2000 1487.37 1024.025132 -0.0081977 28-Apr-2000 1452.43 0.705042675 0 3-May-2000 1415.10 997.705889 -0.0281663 31-May-2000 1420.60 0.702313029 0 5-Jun-2000 1467.63 1030.735671 0.0362803 30-Jun-2000 1454.60 0.708604201 0 6-Jul-2000 1456.67 1032.202482 0.0015595 31-Jul-2000 1430.83 0.721401202 0 3-Aug-2000 1452.56 1047.87853 0.0166433 31-Aug-2000 1517.68 0.690447611 0 6-Sep-2000 1492.25 1030.320447 -0.0183626 29-Sep-2000 1436.51 0.717238618 0 4-Oct-2000 1434.32 1028.749694 -0.0016707 31-Oct-2000 1429.40 0.719707356 0 3-Nov-2000 1426.69 1026.799287 -0.0020777 30-Nov-2000 1314.95 0.780865651 0 5-Dec-2000 1376.54 1074.892803 0.0513296 29-Dec-2000 1320.28 0.814140033 0 4-Jan-2001 1333.34 1085.525472 0.0108404 31-Jan-2001 1366.01 0.794668759 0 5-Feb-2001 1354.31 1076.227847 -0.0093864 28-Feb-2001 1239.94 0.867967682 0 5-Mar-2001 1241.41 1077.50376 0.0012992 30-Mar-2001 1160.33 0.928618375 0 4-Apr-2001 1103.25 1024.498223 -0.05391 30-Apr-2001 1249.46 0.819952798 0 3-May-2001 1248.58 1023.776664 -0.0007718 31-May-2001 1255.82 0.815225641 0 5-Jun-2001 1283.57 1046.399176 0.024216 29-Jun-2001 1224.42 0.85460804 0 5-Jul-2001 1219.24 1041.972306 -0.0046362 31-Jul-2001 1211.23 0.860259659 0 3-Aug-2001 1214.35 1044.656316 0.0028229 31-Aug-2001 1133.58 0.921554999 0 6-Sep-2001 1106.40 1019.608451 -0.0262763 28-Sep-2001 1040.94 0.979507418 0 3-Oct-2001 1072.28 1050.306214 0.0329944 31-Oct-2001 1059.78 0.991060611 0 5-Nov-2001 1102.84 1092.981284 0.0445272 30-Nov-2001 1139.45 0.959218293 0 5-Dec-2001 1170.35 1122.621129 0.0297187 31-Dec-2001 1148.09 0.977816311 0 4-Jan-2002 1172.51 1146.499403 0.0233097 31-Jan-2002 1130.20 1.014421698 0 5-Feb-2002 1090.02 1105.73994 -0.0389603 28-Feb-2002 1106.73 0.999105418 0 5-Mar-2002 1146.14 1145.114684 0.039024 28-Mar-2002 1147.39 0.998016964 0 3-Apr-2002 1125.40 1123.168291 -0.021003 30-Apr-2002 1076.92 1.042944964 0 3-May-2002 1073.43 1119.528413 -0.0035515 31-May-2002 1067.14 1.049092353 0 5-Jun-2002 1049.90 1101.442061 -0.0177045 28-Jun-2002 989.82 1.11277006 0 3-Jul-2002 953.99 1061.57151 -0.0396696 31-Jul-2002 911.62 1.164489052 0 5-Aug-2002 834.60 971.8825629 -0.0925884 30-Aug-2002 916.07 1.06092609 0 5-Sep-2002 879.15 932.7131717 -0.0441672 30-Sep-2002 815.28 1.144040295 0 3-Oct-2002 818.95 936.9117996 0.0049332 31-Oct-2002 885.76 1.057749051 0 5-Nov-2002 915.39 968.2529039 0.0366592 29-Nov-2002 936.31 1.034115735 0 4-Dec-2002 917.57 948.8735751 -0.021934 31-Dec-2002 879.82 1.078486026 0 6-Jan-2003 929.01 1001.924303 0.0612703 31-Jan-2003 855.70 1.170882672 0 5-Feb-2003 843.59 987.7449135 -0.0155092 28-Feb-2003 841.15 1.174279158 0 5-Mar-2003 829.85 974.475559 -0.0147222 31-Mar-2003 848.18 1.148901836 0 3-Apr-2003 876.45 1006.955014 0.0365262 30-Apr-2003 916.92 1.098192878 0 5-May-2003 926.55 1017.530611 0.0115096 30-May-2003 963.59 1.055978799 0 4-Jun-2003 986.24 1041.448531 0.0257598 30-Jun-2003 974.50 1.068700391 0 3-Jul-2003 985.70 1053.417976 0.0125951 31-Jul-2003 990.31 1.063725475 0 5-Aug-2003 965.46 1026.984397 -0.0274993 29-Aug-2003 1008.01 1.01882362 0 4-Sep-2003 1027.97 1047.320117 0.0217002 30-Sep-2003 995.97 1.051557895 0 3-Oct-2003 1029.85 1082.946898 0.037279 31-Oct-2003 1050.71 1.030681062 0 5-Nov-2003 1051.81 1084.080648 0.0011473 28-Nov-2003 1058.20 1.024457236 0 3-Dec-2003 1064.73 1090.770353 0.0067626 31-Dec-2003 1111.92 0.980979165 0 6-Jan-2004 1123.67 1102.296859 0.0115806 30-Jan-2004 1131.13 0.974509436 0 4-Feb-2004 1126.52 1097.80437 -0.0044664 27-Feb-2004 1144.94 0.958831354 0 3-Mar-2004 1151.04 1103.653241 0.0058387 31-Mar-2004 1126.21 0.97997109 0 5-Apr-2004 1150.57 1127.525337 0.0237042 30-Apr-2004 1107.30 1.018265454 0 5-May-2004 1121.53 1142.015254 0.0140834 28-May-2004 1120.68 1.019037776 0 3-Jun-2004 1116.64 1137.898342 -0.0039506 30-Jun-2004 1140.84 0.997421498 0 6-Jul-2004 1116.21 1113.33185 -0.0236596 30-Jul-2004 1101.72 1.010539747 0 4-Aug-2004 1098.63 1110.209283 -0.0030736 31-Aug-2004 1104.24 1.005405784 0 3-Sep-2004 1113.63 1119.650043 0.009319 30-Sep-2004 1114.58 1.004548837 0 5-Oct-2004 1134.48 1139.640565 0.0195663 29-Oct-2004 1130.20 1.008353004 0 3-Nov-2004 1143.20 1152.749154 0.0126054 30-Nov-2004 1173.82 0.982049338 0 3-Dec-2004 1191.17 1169.78771 0.0161981 31-Dec-2004 1211.92 0.96523509 0 5-Jan-2005 1183.74 0 1142.587385 -0.025482 31-Jan-2005 1181.27 0.967253367 0 3-Feb-2005 1189.89 0 1150.925109 0.007997 28-Feb-2005 1203.6 0.956235551 0 3-Mar-2005 1210.47 0 1157.494447 0.0062552 31-Mar-2005 1180.59 0.980437279 0 5-Apr-2005 1181.39 0 1158.278797 0.0007426 29-Apr-2005 1156.85 1.001235075 0 4-May-2005 1175.65 0 1177.102016 0.0178093 31-May-2005 1191.5 0.987916086 0 3-Jun-2005 1196.02 0 1181.567397 0.0041573 30-Jun-2005 1191.33 0.991805291 0 6-Jul-2005 1194.94 0 1185.147814 0.0033208 29-Jul-2005 1234.18 0.960271447 0 3-Aug-2005 1245.04 0 1195.576362 0.0096431 31-Aug-2005 1220.33 0.97971562 0 6-Sep-2005 1233.39 0 1208.371448 0.0117282 30-Sep-2005 1228.81 0.983367199 0 5-Oct-2005 1196.39 0 1176.490684 -0.0289131 31-Oct-2005 1207.01 0.974714943 0 3-Nov-2005 1219.94 0 1189.093748 0.0117396 30-Nov-2005 1249.48 0.951670893 0 5-Dec-2005 1262.09 0 1201.094318 0.0110599 30-Dec-2005 1248.29 0.962191732 0 5-Jan-2006 1273.48 0 1225.331927 0.0221146 31-Jan-2006 1280.08 0.957230741 0 3-Feb-2006 1264.03 0 1209.968374 -0.0137406 28-Feb-2006 1280.66 0.944800629 0 3-Mar-2006 1287.23 0 1216.175714 0.0056221 31-Mar-2006 1294.83 0.939255126 0 5-Apr-2006 1311.56 0 1231.889452 0.0141596 28-Apr-2006 1310.61 0.939935948 0 3-May-2006 1307.85 0 1229.295229 -0.0023078 31-May-2006 1270.09 0.967880409 0 5-Jun-2006 1265.29 0 1224.649403 -0.0041417 30-Jun-2006 1270.2 0.964139036 0 6-Jul-2006 1274.08 0 1228.390263 0.0033475 31-Jul-2006 1276.66 0.962190609 0 3-Aug-2006 1280.27 0 1231.863771 0.0030988 31-Aug-2006 1303.82 0.944811225 0 6-Sep-2006 1300.26 0 1228.500243 -0.0029923 29-Sep-2006 1335.85 0.919639363 0 4-Oct-2006 1350.22 0 1241.715461 0.0117887 31-Oct-2006 1377.94 0.90113899 0 3-Nov-2006 1364.3 0 1229.423925 -0.010848 30-Nov-2006 1400.63 0.877764952 0 5-Dec-2006 1414.76 0 1241.826743 0.0110557 29-Dec-2006 1418.3 0.875574098 0 5-Jan-2007 1409.71 0 1234.305562 -0.0066373 31-Jan-2007 1438.24 0.858205558 0 5-Feb-2007 1446.99 0 1241.814861 0.0066672 28-Feb-2007 1406.82 0.882710553 0 5-Mar-2007 1374.12 0 1212.950225 -0.0254728 30-Mar-2007 1420.86 0.853673286 0 4-Apr-2007 1439.37 0 1228.751718 0.0142765 30-Apr-2007 1482.37 0.828910271 0 3-May-2007 1502.39 0 1245.346502 0.0148004 31-May-2007 1530.62 0.813622259 0 5-Jun-2007 1530.95 0 1245.614997 0.0002363 29-Jun-2007 1503.35 0.828559548 0 5-Jul-2007 1525.4 0 1263.884735 0.0160737 31-Jul-2007 1455.27 0.86848814 0 3-Aug-2007 1433.06 0 1244.595613 -0.0167252 31-Aug-2007 1473.99 0.844371816 0 6-Sep-2007 1478.55 0 1248.445949 0.0033903 28-Sep-2007 1526.75 0.81771472 0 3-Oct-2007 1539.59 0 1258.945406 0.0092165 31-Oct-2007 1549.38 0.812547862 0 5-Nov-2007 1502.17 0 1220.585021 -0.0333921 30-Nov-2007 1481.14 0.824084841 0 5-Dec-2007 1485.01 0 1223.77423 0.0028634 31-Dec-2007 1468.36 0.833429288 0 4-Jan-2008 1411.63 0 1176.493786 -0.0423397 31-Jan-2008 1378.55 0.853428447 0 5-Feb-2008 1336.64 0 1140.7266 -0.0333167 29-Feb-2008 1330.63 0.857283091 0 5-Mar-2008 1333.7 0 1143.358459 0.0025284 31-Mar-2008 1322.7 0.864412534 0 3-Apr-2008 1369.31 0 1183.648727 0.0386176 30-Apr-2008 1385.59 0.854256113 0 5-May-2008 1407.49 0 1202.356936 0.0173211 30-May-2008 1400.38 0.858593336 0 4-Jun-2008 1377.2 0 1182.454743 -0.0181399 30-Jun-2008 1280 0.923792768 0 3-Jul-2008 1262.9 0 1166.657886 -0.0146404 31-Jul-2008 1267.38 0.920527297 0 5-Aug-2008 1284.88 0 1182.767114 0.0151321 29-Aug-2008 1282.83 0.921998327 0 4-Sep-2008 1236.83 0 1140.355191 -0.0392967 30-Sep-2008 1166.36 0.977704303 0 3-Oct-2008 1099.23 0 1074.721901 -0.0630741 31-Oct-2008 968.75 1.109390349 0 5-Nov-2008 952.77 0 1056.993843 -0.0180772 28-Nov-2008 896.24 1.179364727 0 3-Dec-2008 870.74 0 1026.920043 -0.0311805 31-Dec-2008 903.25 1.136916737 0 6-Jan-2009 934.7 0 1062.676074 0.0381575 30-Jan-2009 825.88 1.28671971 0 4-Feb-2009 832.23 0 1070.846744 0.008426 27-Feb-2009 735.09 1.456755968 0 4-Mar-2009 712.87 0 1038.477627 -0.0331261 31-Mar-2009 797.87 1.301562443 0 3-Apr-2009 842.5 0 1096.566359 0.0613002 30-Apr-2009 872.81 1.256363193 0 5-May-2009 903.8 0 1135.501054 0.0389107 29-May-2009 919.14 1.235395102 0 3-Jun-2009 931.76 0 1151.09174 0.0150468 30-Jun-2009 919.32 1.252112148 0 6-Jul-2009 898.72 0 1125.29823 -0.0245566 31-Jul-2009 987.48 1.139565591 0 5-Aug-2009 1002.72 0 1142.665209 0.0169131 31-Aug-2009 1020.62 1.119579481 0 3-Sep-2009 1003.24 0 1123.206918 -0.0186618 30-Sep-2009 1057.08 1.06255621 0 5-Oct-2009 1040.46 0 1105.547234 -0.0172302 30-Oct-2009 1036.19 1.066934861 0 4-Nov-2009 1046.5 0 1116.547332 0.010904 30-Nov-2009 1095.63 1.019091602 0 3-Dec-2009 1099.92 0 1120.919235 0.004291 31-Dec-2009 1115.1 1.005218577 0 6-Jan-2010 1137.14 0 1143.074253 0.0216603 29-Jan-2010 1073.87 1.06444379 0 3-Feb-2010 1097.28 0 1167.992882 0.02389 26-Feb-2010 1104.49 1.057495208 0 3-Mar-2010 1118.79 0 1183.115063 0.0141887 31-Mar-2010 1169.43 1.011702336 0 6-Apr-2010 1189.44 0 1203.359227 0.0187517 30-Apr-2010 1186.69 1.014046825 0 5-May-2010 1165.9 0 1182.277194 -0.0191993 28-May-2010 1089.41 1.085245402 0 3-Jun-2010 1102.83 0 1196.841187 0.0134998 30-Jun-2010 1030.71 1.161181309 0 6-Jul-2010 1028.06 0 1193.764056 -0.0028176 30-Jul-2010 1101.6 1.083663813 0 4-Aug-2010 1127.24 0 1221.549196 0.0255071 31-Aug-2010 1049.33 1.164123008 0 3-Sep-2010 1104.51 0 1285.785504 0.0576284 30-Sep-2010 1141.2 1.126696025 0 5-Oct-2010 1160.75 0 1307.812411 0.0187738 29-Oct-2010 1183.26 1.105262082 0 3-Nov-2010 1197.96 0 1324.059764 0.0136146 30-Nov-2010 1180.55 1.121561784 0 3-Dec-2010 1224.71 0 1373.587932 0.0409932 31-Dec-2010 1257.64 1.092194851 0 5-Jan-2011 1276.56 0 1394.252259 0.0164866 31-Jan-2011 1286.12 1.084076337 0 3-Feb-2011 1307.1 0 1416.996181 0.0178769 28-Feb-2011 1327.22 1.067642275 0 3-Mar-2011 1330.97 0 1420.999839 0.0030964 31-Mar-2011 1325.83 1.071781329 0 5-Apr-2011 1332.63 0 1428.287952 0.0056207 29-Apr-2011 1363.61 1.047431415 0 4-May-2011 1347.32 0 1411.225294 -0.0130918 31-May-2011 1345.2 1.04908214 0 3-Jun-2011 1300.16 0 1363.974635 -0.0366926 30-Jun-2011 1320.64 1.032813359 0 6-Jul-2011 1339.22 0 1383.164307 0.015418 29-Jul-2011 1292.28 1.070328649 0 3-Aug-2011 1260.34 0 1348.97801 -0.027086 31-Aug-2011 1218.89 1.10672662 0 6-Sep-2011 1165.24 0 1289.602127 -0.0482361 30-Sep-2011 1131.42 1.139808494 0 5-Oct-2011 1144.03 0 1303.975112 0.012214 31-Oct-2011 1253.3 1.040433345 0 3-Nov-2011 1261.15 0 1312.142514 0.0068641 30-Nov-2011 1246.96 1.052273139 0 5-Dec-2011 1257.08 0 1322.791518 0.008894 30-Dec-2011 1257.6 1.051838039 0 5-Jan-2012 1281.06 0 1347.467638 0.0204434 31-Jan-2012 1312.41 1.026712413 0 3-Feb-2012 1344.9 0 1380.825525 0.0271298 29-Feb-2012 1365.68 1.011090098 0 5-Mar-2012 1364.33 0 1379.460553 -0.0010833 30-Mar-2012 1408.47 0.979403575 0 4-Apr-2012 1398.96 0 1370.146425 -0.0073995 30-Apr-2012 1397.91 0.980139226 0 3-May-2012 1391.57 0 1363.932342 -0.0049702 31-May-2012 1310.33 1.040907514 0 5-Jun-2012 1285.5 0 1338.086609 -0.0207665 29-Jun-2012 1362.16 0.982327046 0 5-Jul-2012 1367.58 0 1343.410821 0.0043605 31-Jul-2012 1379.32 0.973966028 0 3-Aug-2012 1390.99 0 1354.777005 0.009272 31-Aug-2012 1406.58 0.963170957 0 6-Sep-2012 1432.12 0 1379.376391 0.0198986 28-Sep-2012 1440.67 0.957454789 0 3-Oct-2012 1450.99 0 1389.257324 0.0078502 31-Oct-2012 1412.16 0.983781813 0 5-Nov-2012 1417.26 0 1394.274612 0.0039578 30-Nov-2012 1416.18 0.984532059 0 5-Dec-2012 1409.28 0 1387.48134 -0.0053395 31-Dec-2012 1426.19 0.972858694 0 4-Jan-2013 1466.47 0 1426.668089 0.0309513 31-Jan-2013 1498.11 0.952311972 0 5-Feb-2013 1511.29 0 1439.21956 0.0096414 28-Feb-2013 1514.68 0.950180606 0 5-Mar-2013 1539.79 0 1463.078595 0.0181674 28-Mar-2013 1569.19 0.93237823 0 3-Apr-2013 1553.69 0 1448.626733 -0.0108249 30-Apr-2013 1597.57 0.906768863 0 3-May-2013 1614.42 0 1463.905788 0.0115587 31-May-2013 1630.74 0.897694168 0 5-Jun-2013 1608.90 0 1444.300148 -0.0146769 28-Jun-2013 1606.28 0.899158396 0 3-Jul-2013 1615.41 0 1452.509464 0.006229 31-Jul-2013 1685.73 0.861650124 0 5-Aug-2013 1707.14 0 1470.957393 0.0139186 30-Aug-2013 1632.97 0.900786538 0 5-Sep-2013 1655.08 0 1490.873783 0.0148381 30-Sep-2013 1681.55 0.886606871 0 3-Oct-2013 1678.66 0 1488.311489 -0.0018835 31-Oct-2013 1756.54 0.847297237 0 5-Nov-2013 1762.97 0 1493.759611 0.0040116 29-Nov-2013 1805.81 0.827196444 0 4-Dec-2013 1792.81 0 1483.006057 -0.0078893 31-Dec-2013 1848.36 0.802336156 0 6-Jan-2014 1826.77 0 1465.683619 -0.0128007 31-Jan-2014 1782.59 0.822221385 0 5-Feb-2014 1751.64 0 1440.235867 -0.0190273 28-Feb-2014 1859.45 0.774549392 0 5-Mar-2014 1873.81 0 1451.358397 0.0084632 31-Mar-2014 1872.34 0.775157502 0 3-Apr-2014 1888.77 0 1464.094234 0.0096166 30-Apr-2014 1883.95 0.777140707 0 5-May-2014 1884.66 0 1464.646004 0.000413 30-May-2014 1923.57 0.761420694 0 4-Jun-2014 1927.88 0 1467.927727 0.0024555 30-Jun-2014 1960.23 0.748854842 0 3-Jul-2014 1985.44 0 1486.806358 0.014094 31-Jul-2014 1930.67 0.770098649 0 5-Aug-2014 1920.21 0 1478.751126 -0.0059373 29-Aug-2014 2003.37 0.738131811 0 4-Sep-2014 1997.65 0 1474.529012 -0.003129 30-Sep-2014 1972.29 0.74762282 0 3-Oct-2014 1967.90 0 1471.246948 -0.0024393 31-Oct-2014 2018.05 0.729043853 0 5-Nov-2014 2023.57 0 1475.27127 0.0029976 28-Nov-2014 2067.56 0.713532507 0 3-Dec-2014 2074.33 0 1480.101885 0.0035884 31-Dec-2014 2058.90 0.718879929 0 6-Jan-2015 2002.61 0 1439.636134 -0.0299615 30-Jan-2015 1994.99 0.721625739 0 4-Feb-2015 2041.51 0 1473.206163 0.0255544 27-Feb-2015 2104.50 0.700026687 0 4-Mar-2015 2098.53 0 1469.027004 -0.0031088 31-Mar-2015 2067.89 0.710399008 0 6-Apr-2015 2080.62 0 1478.070383 0.0067463 30-Apr-2015 2085.51 0.7087333 0 5-May-2015 2089.46 0 1480.86988 0.0020756 29-May-2015 2107.39 0.702703287 0 3-Jun-2015 2114.07 0 1485.563938 0.0034738 30-Jun-2015 2063.11 0.720060461 0 6-Jul-2015 2068.76 0 1489.63228 0.0030012 31-Jul-2015 2103.84 0.708053977 0 05-08-2015 2099.84 0 1486.800064 -0.0020836 31-08-2015 1972.18 0.753886594 0 03-09.2015 1951.13 0 1470.930751 -0.011697 30-09-2015 1920.03 0.766097796 0 05-10-2015 1987.05 0 1522.274625 0.0382528Related Questions
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