Strange Days: The Turn-of-the-month Effect in Sweden

Abstract: We analyze daily price data for the Swedish stock market during 2003-2012 and find evidence of a turn-of-the-month effect. Furthermore, the effect in Sweden occurs earlier in the month compared to previous studies, as predicted by the preferred habitat theory. We find more pronounced effects for equal-weighted indexes, suggesting that individual investor behavior help explaining the effect. For mid-sized firms, our findings suggest that that the Friday effect is driven by the TOM effect. Finally, our findings indicate that the TOM effect is inversely related to the long term trend of the stock market, supporting our expectation of constrained investor liquidity as an explanation to the TOM effect.