Return-enhancing strategies with international ETFs
Exploiting the turn-of-the-month effect
DOI:
https://doi.org/10.61190/fsr.v31i3.3338Keywords:
Risk, Return, Turn-of-the-month, International equity, ETFAbstract
We show that the average return over the four-day period surrounding the turn of the month is significantly positive in eight out of the nine international exchange-traded funds (ETFs). The strategy of buying-and-holding an ETF during turn-of-the-month (TOM) period and switching to holding T-bills during non-TOM period produces significantly positive monthly average returns. This ETF- T-bills switching strategy also has the lowest risk and highest Sharpe ratio and Sortino ratio than the traditional strategy of buying-and-holding either an index fund or an ETF. Investors pursuing this switching strategy generate a terminal value twice larger than the next best strategy of buying-and- holding an ETF.
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Copyright (c) 2023 Haiwei Chen, Sang Heon Shin, Xu Sun
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