Using Market Strength to Trade the Turn-of-Month Effect

Summary

This Chinese research summary examines the turn-of-month calendar effect, described as stronger returns in the first half of a month than in the second. It reports that a simple strategy of buying during the first half and shorting during the second performed differently depending on market strength, measured with average RPS. In the weaker-strength group, positive-return months were more frequent and the median return was positive; in the stronger group, fewer months were positive and the median was negative.

The proposed index strategy was tested on the SSE 50 over June 2005 to July 2018, and the summary reports cumulative and annualized results for the combined approach and its long and short components. It also reports a long-only application to the ChinaAMC SSE 50 ETF, including returns and trade frequency. These are historical results from a specific Chinese index and period. The source provides only a summary and a reference to a full report, so details such as signal construction, transaction costs, risk controls, and robustness across other markets are not available here.

Key ideas

• The document frames stronger first-half than second-half monthly returns as a turn-of-month calendar effect.
• The reported effect varies with market strength measured using average RPS.
• The proposed index strategy combines the calendar pattern with a market-strength condition.
• The summary reports separate results for the combined strategy, its long and short components, and a long-only ETF application.
• The evidence is limited to a historical test on a Chinese index and ETF, with implementation details deferred to the cited report.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.