Strategy pattern · Seasonality
Test a turn-of-the-month strategy with real exchange calendars.
Super Algo Kit grades the turn-of-the-month strategy B: hold an equity index only over the last and first few trading days of each month. Studies of long histories found a large share of index returns in those days. Calendar effects are also a textbook case of data mining, so the kit tests your window on real exchange calendars before a paper run.
strategy facts
Turn-of-the-month seasonality in equity indices
- Family
- Seasonality, from published literature
- Markets
- Equity indices through a liquid index future, ETF or index CFD
- Timeframes
- Daily bars; about twelve events a year
- Evidence grade
- B: seen across long histories, though later work warns that calendar effects are easy to find by data mining
- Status
- Literature: described in published research, not yet tested by the kit
- Data needed
- Decades of daily index history, exchange calendars for every year, futures roll dates, costs and turnover taxes
- Calendar rule
- The window counts exchange trading days from each year's venue calendar, not plain dates
From the kit's own card. Not investment advice.
Paper first
Test it before you trade it.
Super Algo Kit runs inside the coding agent you already use. It interviews you, writes the spec with pass marks set first, then builds, backtests and paper-tests. Real money starts only when you type the authorize command.
The plan, step by step
Tick them off as you go.
How does the turn-of-the-month effect work?
Over long index histories, researchers found that a big slice of equity returns landed in the handful of days around each month end. The usual explanation is regular money flows: pay and pension contributions invested as a month starts, plus fund rebalancing and window dressing as it ends.
Whoever sells into those predictable flows is on the other side. Calendar effects are also a classic case of data mining, so the evidence needs a careful reading.
Turn-of-the-month rules in plain words
This is a summary of the card's sketch. Every window variant you try counts as a trial.
- Use a liquid index product: a future, an ETF or an index CFD.
- Enter at the close of the month's last trading day, or a declared number of days earlier.
- Exit when the new month's third trading day closes.
- Stay flat outside the window, with no extra filters unless declared as trials.
Where turn-of-the-month seasonality breaks
The effect has been weak or missing in some decades and some markets. If the flows are widely known, traders may act earlier and shift the window.
With only twelve events a year, even long samples give few independent observations. Calendar bugs are a quiet risk too: a holiday list that covers one year shifts the window in every later year.
How Super Algo Kit tests a seasonality bot before any money
You declare the window before testing, and every variant is logged as a trial. Exchange calendars load as data for every year, and the year rollover has its own test.
Because events are monthly, the minimum track record in walk-forward validation can need decades of data. If your data cannot reach it, the report says so.
Before you rely on it
Where it fails.
- Some decades and some markets show little or no effect.
- Calendar bugs: a holiday list built for one year quietly moves the window in every later year.
- Data mining: many calendar effects were tested, and some were found by chance.
- Front-running: once the flows are well known, traders act sooner and the window drifts.
- Twelve events a year means even long samples hold few independent data points.
FAQ
Turn-of-the-month: questions.
Does the turn-of-the-month effect still work?
Super Algo Kit makes no promise that it does. The kit grades it B: it shows up across long histories, but fades or vanishes in some decades and markets. Later critiques also warn that calendar quirks are easy to find by chance.
Which days count as the turn of the month?
The card's window opens at the close of the month's last trading day and ends when the next month's third trading day closes. You may declare an earlier start, but each variant is a trial. Count trading days from the exchange calendar, never plain dates.
How much data do I need to test a monthly calendar effect?
A lot, because there are only twelve events a year. The minimum track record length in walk-forward validation can require decades of daily data. Super Algo Kit states it plainly if your data cannot reach that length.
Why do holiday calendars matter for a seasonality bot?
A holiday list hard-coded for one year silently shifts the window in later years. Super Algo Kit loads exchange calendars as data for every year in the test, including early closes. It also tests the rollover into a new year.
Can Super Algo Kit build a turn-of-the-month trading bot?
Super Algo Kit helps your own AI coding agent build it as real code in your project. It interviews you, declares the window and pass marks in a spec, backtests with costs and runs a paper test. Live starts only when you type the authorize command.
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- Ariel (1987). A Monthly Effect in Stock Returns. Journal of Financial Economics.
- Lakonishok and Smidt (1988). Are Seasonal Anomalies Real? A Ninety-Year Perspective. Review of Financial Studies.
- McConnell and Xu (2008). Equity Returns at the Turn of the Month. Financial Analysts Journal.
- Sullivan, Timmermann and White (2001). Dangers of data mining: The case of calendar effects in stock returns. Journal of Econometrics.
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Super Algo Kit is development software. It is not investment advice, a signal service or a promise of performance. Trading involves substantial risk, including the loss of all capital you trade with.