The Turn-of-the-Month Effect in the U.S. Stock Index Futures Markets, 1982–1992

The mean return for small and large capitalized stocks in the cash and futures markets was positive in the first half of the month and negative in the second half of the month during the 10-year period of futures trading from May 1982–April 1992. The mean return in the cash and futures markets for small and large capitalized stocks at the turn-of-the-month fiveday trading period was significantly greater than average. There was partial anticipation of the cash turn-of-the-month effect in the futures markets on the previous three trading days. There was seasonality in the monthly return patterns, with the first and last quarter exhibiting higher returns at the turn-of-the-month and in the first half of the month. These results are an out-of-sample confirmation of the turn-of-the-month anomaly Ariel (1987) reported for the cash market in the earlier period 1963–1981. The anomaly appears in the cash and futures markets, ruling out many explanations of the cash market anomaly that are based on trading frictions.