Want higher stock returns? Wait for month-end!

For those eyeing better gains from the stock markets, trading sessions towards the end of a calendar month could well be the best time, as those days are found to offer better investor returns. These are the findings of an analysts’ team from global research agency Macquarie, who pored over data since 1988 about various indices worldwide including MSCI India.

“Returns around the change of a calendar month account for all positive returns in equity markets,” the analysts said in their research report.

Noting that daily data since 1988 for a variety of indices were used, the report said there is a strong surge in returns leading into the turn of the month. “The effect is not just an Asian effect — it happens globally,” Macquarie added.

 

The results are based on analyses of 32 global (Morgan Stanley Composite) indices. Their average daily returns of the two days before and the two days after the turn of the month were compared to the average daily returns for the rest of the month.

“Of the 32 markets analysed, all showed higher-than average returns around the turn of the month. And, for many of the markets, the average return for the rest of the month was below, or close to zero,” the report said.

On the other hand, the research has also concluded that lunar cycles, too, affects stock market returns. Based on daily data from the MSCI indices, the research found that in many markets, there was an increase in average returns, especially while leading into the lunar new month.

According to the report, the trend is extremely consistent through the global equity markets. “If we look at the five trading days leading into, and five trading days leading out of the new moon period, and compare that with the rest of the month, we note that every market showed a very slight increase in the average return over the new moon period,” it said.

For arriving at lunar data, Macquarie used the Chinese lunar calendar rather than the actual lunar cycle, which have some small differences.