The Turn-of-the-Month anomaly in the New Zealand Stock Exchange
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The turn-of the-month (TOM, hereafter) effect refers to the phenomenon of stock returns being higher during the first few trading days of each month. This study aims to investigate the presence of the TOM effect in the New Zealand Stock Exchange and also attempts to find out why such an anomaly exists and whether it is caused by the trading activities of institutional investors. More specifically, we examine the Turn of the Month effect in the New Zealand stock market, and find that the returns on the last 3 days of the calendar month are, on average, positive and significantly higher than on other days of the month. Furthermore, we examine three competing theories proposed by the prior literature, namely cash-driving, window dressing, and market manipulation. There are two main findings in this study. First, our evidence suggests a significant TOM effect within the large firms listed in NZX. Also, our study rules out the cash-driving theory as the reason for the TOM effect, but lends some weight to other theories, implying that the TOM anomaly may be driven by the trading activities of mutual funds.