Could market efficiency explain the disappearance of the “end of month” effect?

Abstract

This study investigates the disappearance of the end of month effect in the period from 2006 to 2023. Previously, from 1987 to 2005 the end of month effect was present in both CRSP value weighted and equal weighted indexes as proven by McConell and Xu (2008) which presents a challenge to Efficient Market Hypothesis introduced by Eugene Fama (1970), however in recent years the effect has vanished. An increase of market efficiency hypothesis is studied here using an event study methodology to evaluate abnormal returns and cumulative abnormal returns across the two periods. While some findings suggest that an increase in market efficiency may have influenced the disappearance of the effect, the evidence does not conclusively support a significant improvement in market efficiency between the two periods.

Date of Award	3 Feb 2025
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	Eva Schliephake (Supervisor)