Turn-of-the-Month Effect: does it still work? Replicated through 2026
We re-ran it on S&P 500 from 2010-01-04 to 2026-11-10 (16.8 years, before costs): +3.3% a year, Sharpe 0.49, worst drawdown -13.8%. The benchmark, S&P 500 buy-and-hold, did +13.8% a year (Sharpe 0.85, worst drawdown -33.7%).
Verdict: Worse risk-adjusted return than its benchmark over this period. Historical, hypothetical results before costs, taxes and fees. Not investment advice.
This replica applies the published rule as written, on the instrument we have. It is still a backtest on ETF data, before costs.
What is lost
- The exact window follows our reading of the paper and may differ by a day.
- SPY instead of the Dow Jones index over 90 years.
Where it comes from
A founding academic paper on calendar anomalies, now a standard reference in seasonality research.
Rules, weights and thresholds are given as commonly cited. We have not re-checked them against the primary text.
The original rules
Using 90 years of Dow data, nearly all price gains came in the four trading days around the turn of the month, from the last trading day to the third trading day of the new month.
How we replicate it
What we changed
SPY only. We hold the window from the close before the last trading day through the third trading day of the next month, so the last day's return is captured; cash otherwise.
The exact rule we run
Buy 100% SPY at the close of the second-to-last trading day of each month; sell to cash at the close of the 3rd trading day of the next month. Otherwise hold cash.
Conventions: Position decided at a close earns the next day's return; no look-ahead; before costs; cash earns 0%; starts 2010-01-04, the first day a signal exists; every market has an equal slot of equity; indicators use each market's own trading days.
Growth of 1 vs the benchmark
Benchmark: S&P 500 buy-and-hold, same period. Bought on the first day and held.
Drawdown from the previous peak
Key numbers
Sample: 2010-01-04 to 2026-11-10, 16.8 years, 4240 daily observations. Annualised from the number of observations per year of the strategy's own calendar. Before costs.
Recent and full-period returns
| Period | Replica | Benchmark |
|---|---|---|
| Last month | -0.3% | -3.7% |
| Last year | +12.8% | +11.2% |
| Last 5 years | +10.5% | +72.9% |
| Whole period (cumulative) | +73.6% | +788.9% |
Calendar-year returns
| Year | Replica | Benchmark | Replica minus benchmark |
|---|---|---|---|
| 2026* | +12.9% | +10.8% | +2.1% |
| 2025 | +1.3% | +17.7% | -16.4% |
| 2024 | -4.7% | +24.9% | -29.6% |
| 2023 | +6.7% | +26.2% | -19.5% |
| 2022 | -2.4% | -18.2% | +15.7% |
| 2021 | +1.9% | +28.7% | -26.8% |
| 2020 | +16.2% | +18.3% | -2.1% |
| 2019 | +3.1% | +31.2% | -28.1% |
| 2018 | -1.6% | -4.6% | +3.0% |
| 2017 | +4.7% | +21.7% | -17.0% |
| 2016 | -1.1% | +12.0% | -13.1% |
| 2015 | -2.0% | +1.2% | -3.3% |
| 2014 | -1.3% | +13.5% | -14.8% |
| 2013 | +4.3% | +32.3% | -28.0% |
| 2012 | +8.7% | +16.0% | -7.3% |
| 2011 | -1.6% | +1.9% | -3.5% |
| 2010 | +13.8% | +13.1% | +0.7% |
* Partial year. The first year starts on the first day of the replica; the current year is year to date.
Position as of 2026-11-10
| Holding | Weight |
|---|---|
| Cash (0%) | 100.0% |
Currently entirely in cash. Last change of position: 2026-11-04. Drawdown from its peak today: -0.3%.
What it did in 2020 and 2022
| Episode | Dates | Replica | Benchmark |
|---|---|---|---|
| COVID crash | 2020-02-19 → 2020-03-23 | +5.2% | -33.7% |
| 2022 bear market | 2022-01-03 → 2022-10-12 | +0.9% | -24.5% |
Close to close between the two dates. Two episodes only: not enough to judge a strategy.
How much to trust it
- 405 position changes over 16.8 years.
- This is one backtest on one path of history, before costs and with hindsight on the choice of strategy. It does not show the strategy will work in future.
Honest caveat
The window boundaries follow our reading of the paper, so the exact days may differ by a day.
Related
Other famous strategies
Closest strategies on Quant Arena
Similar idea, tested on the site's own rule set; not the same rule.
Markets used: S&P 500
Historical, hypothetical results before costs, taxes and fees. Not investment advice.