End of Quarter Effect (Strategy) in the Stock Market: Backtest and Performance Analysis

Is there a distinct trend in the U.S. stock market’s returns during the closing days of calendar quarters? Do investment funds strategically allocate cash to drive up stock prices to enhance portfolio values in quarterly reports? Is there a unique end-of-quarter effect strategy that can be differentiated from the turn-of-the-month strategy? In short, is there an end-of-quarter effect in the stock market?

No, our backtests reveal that the end of quarter effect in stocks is mainly a myth. However, performance varies from quarter to quarter.

The media and talking heads frequently mention the end of quarter effect, but our backtests reveal that the effect is a myth. As a matter of fact, if we exclude the fourth-quarter effect, the returns are negative!

If you want other seasonal trading strategies like this one, we have covered many on our landing page of short-term trading strategies.