Historically and up to 2013, equities exhibited a positive bias during the end of the month.

Here is an example of buying the SPY ETF on the first down-day after the 23rd and selling on the first up-day of the next month. Trading is at the same day close.

This has been well documented in academic papers as well as blogs. The main reason quoted for this persistent bias has been end-of-month window dressing.

As one of my favorite author/blogger/trader, Mr. Grøtte, also recently blogged here, the EOM bias is no more.

Why is this important to know?

A lot of investors re-balance monthly. The day of the re-balance used to be somewhat important as there was an EOM bias. So it was better to 'buy' at the end of the month rather than at the beginning of the month. As of late (2013) this is less true.

What this means in practice is that the specific timing for re-balancing monthly strategies may be less important than it used to be.

Broader Strategy Development Implications

Market edges are best revealed by understanding and measuring pattern based human behavior.   For a long time, the money flows supported end of the month as a buying edge but recently market patterns shifted.  

Market edges are not eternal.   As they are observed and traded, they can morph.   Logical Invest’s process first involves uncovering edges that are well grounded.  Next we systematically statically test for the stability of these edges.   If we are using them in a model, we monitor if an edge sufficiently shifts out of bounds from historical patterns, then we further investigate and adjust the models and guidance as appropriate.