Turn-of-the-month effect in three major emerging countries

摘要

Purpose - The purpose if this paper is to examine the turn-of-the-month effect in the equity market of three major emerging countries - Brazil, India and China - from January 2000 to December 2017. Design/methodology/approach - Ordinary least square regression analysis is used to examine the presence of the turn-of-the-month effect and to test the efficiency of the emerging stock markets. The characteristics of the returns during the turn-of-the-month days are compared with that of the non-tum-of-the-month trading days. Findings - The average returns during turn-of-the-month days for all the considered emerging market indices are significantly higher than the non-turn-of-the-month days for the full sample. For the subsample analysis, the average returns for Brazil and India for pre-GFC period are higher on the turn-of-the-month days than on the non-turn-of-the-month days. However, the effect disappears in China during the GFC period. During the crisis period, the results show that the turn-of-the-month effect disappears in Brazil and India, whereas for China, the effect is significant. For the post-GFC period, the-turn-of-the-month effect reappears for all the countries. Practical implications - The results have important implications for both traders and investors. The authors' results indicate that the market participants can time the stock markets of these countries by taking long positions especially during the times when the turn-of-the-month effect is highly significant. Originality/value - To the best of the authors' knowledge, this paper is the first to study the turn-of-the-month effect, in the key emerging countries such as Brazil, China and India. Second, the authors divide the sample into three subperiods based on the 2008 GFC such as pre-GFC, GFC and post-GFC to understand the dynamic behavior of turn-of-the-month effect over time. Most importantly, the authors control for the day-of-the-week effect while examining the turn-of-the-month effect.