Turn of The Month Effect: Evidence From The Nairobi Securities Exchange

Abstract

This study sought to investigate if Turn of the Month effect exists at the Nairobi Securities Exchange. In carrying out the study,  the days of the month were divided into two, the Turn of the Month (TOM) which included the last trading day of the month and the first three trading days of the following month. The other trading days of the month were categorized as Rest of the Month (ROM). The 20 share index was used as the sampling frame and the daily indices were used to compute the daily returns.
Secondary data was obtained from the Nairobi Securities Exchange data base. The TOM coefficient was not significant to confirm TOM effect. It is therefore concluded that there is no TOM effect at the Nairobi Securities Exchange. To practice, the study will give vital information to brokerage firms as they will advise their clients on the best time of the month to sell or buy securities. The findings of the study will also be of benefit to policy formulation aimed at improving capital market efficiency.
Keywords: Turn of the Month, Rest of the Month, Twenty Share Index, Market Efficiency and Nairobi Securities Exchange.