Turn-of-the-Month Effect, FX Influence, and Efficient Market Hypothesis: New Perspectives from the Johannesburg Stock Exchange

Abstract

This paper examines the Turn of the Month (TOM) effect in the highly capitalized emerging South African stock market which presents this calendar not only in the stock market, but in the USDZAR FX market also. These characteristics enable us to gain new perspectives on the study of the TOM effect. Specifically, we show that the inefficiencies in FX market (against a hard currency) influence not only the domestic stock market’s performance but also its Calendar Anomalies (CA). Additionally, we present some practical strategies based on the TOM effect which can prove beneficial for investors and outperform the stock market.