The Myth of End of Quarter Window Dressing Market Gains

Many pundits like to use "end of quarter window dressing" as a reason why markets should outperform in the days leading up to the end of the quarter. The theory goes that during times when the market is moving higher, professional money managers want to have equities on the books to make their holdings look better when their investors check out their quarterly statements. Along with having a low amount of cash on the books at the end of quarters when the market has done well, money managers also want to have the best performing stocks on the books.

But during the current bull market, the markets have actually performed poorly in the final days. Since the fourth quarter of 2002, the S&P 500 has averaged a decline of -0.01% in the final two days of the quarter, and a decline of -0.28% on the final day of the quarter. It has gone up just 4 out of 19 times on the last day of the quarter, and over the past 12 quarters, the final day has been negative 11 times.

Comments

[Buffer:]

I was a Head Trader for a money management firm for many years and at the end of every quarter would enter six figuar buy orders just before the close and take every offering, buy it and bid it, run it. And of course dump the bad performers and get them of the books.

2007 Sep 27 03:51 PM

[Questioning...:]

Think about how bad those days would have been had end of the quarter window dressing not occurred.

2007 Sep 27 10:43 PM

[gordon:]

"Fast Money" show last night was either blatantly stupid or deceptive by suggesting TODAY, the most obvious transaction day on the fund's books was "the" window-dressing. Just look at all the big winners making new highs, I could list 2 dozen where they started buying ON TUESDAY, WED, and half of THURSDAY. They think their audience is that stupid? On Tuesday they loaded into the big defense stocks, look at the etf ITA/holdings on Tuesday. And no, they aren't going to load- up the same sector the next day. Anyone except the blind could easily see it. Today, there's no support /volume under most of those.

2007 Sep 28 01:20 PM