Do Stocks Show a Bullish Bias at Month’s End?

As we head into the last few trading days of the April, now is a good time to revisit some research we published late last year. Many of you are probably aware of the “end-of-the month” phenomena — when money managers pile into the stocks at the end of the month in anticipation of 401k and savings money coming in. Well, we decided to take a quantitative look at whether there was any statistical evidence to support it, and potentially profit from the behavior.


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We looked at over seven million trades going back to January 1995*. We then broke these trades down to the day of the month, meaning we asked “if we bought every stock today, how would we have done over the next five trading days?” We did this for every day of the month, for every stock that was trading in a longer-term uptrend, meaning above its 200-day moving average.


Here are the some notes of our findings:

The average gain for all days (meaning you randomly bought a stock and held it for five days) when it was above its 200-day MA from January 1995-September 2006 was 0.27% (see table 1).

Table 1: Baseline Days of the Month


Days which have outperformed by a 2:1 margin or greater are in green.



Now, let’s look at what happens as we start approaching month’s-end. The average gains rise…significantly. On the 23rd day of the month, the average gain for these stocks more than doubles. On the 24th it triples. On the 25th it almost quadruples! And this type of behavior holds through the end of the month (see table 2 below).


Table 2: One or More Down Closes


Days which have outperformed by a 2:1 margin or greater are in green.



Let’s go further by looking at what happens at the early part of the next month. In spite of a strong upward move in stock prices over the past 11 3/4 years, stocks on average have “lost money” for the six consecutive days from the 3rd through the 8th (see table 3 below). Money spent is money spent, and it looks like the fund managers spent their money near the end of the previous month.


And now let’s go even further and look at something which is even more eye-opening. Let’s look at what happens after a stock drops the previous day. The returns for those stocks go up even more near month’s-end. And if the stock has dropped two days in a row, the gains become extreme. On the 25th and the 26th, the stocks which have dropped two days in a row have risen more than 1.5% on average over the next five trading days. If you annualize that out, it’s pretty obvious one can make a heck of a living with returns like this.


More to number 4. After a stock has dropped two days in a row going into the 25th, 26th and 27th day of the month, more than 60% of the stocks closed higher five trading days later (see table 3 below).


Table 3: Two or More Down Closes


Days which have outperformed by a 2:1 margin or greater are in green.



We show that over the past 11 3/4 years, stocks have been much stronger near months-end than they have been any other time of the month. And, stocks which have dropped a day or two near the end of the month have out-performed even more. The fund managers like to buy near months-end, and it looks like they especially like to buy stocks as cheap as possible near months-end.


This research can go much further. The size of the drop, ETF and futures trading, short selling, pairs trading, combining PowerRatings (for Traders) with the day of the month, further intra-day drops, etc. are all there for a deeper look.


Have a great week trading!


* Our research looked at 7,050,517 trades since Jan 1, 1995. We applied a price and liquidity filter that required all stocks be priced above $5 and have a 100-day moving average of volume greater than 250,000 shares.


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Larry Connors is CEO and Founder of TradingMarkets.com.