"This paper uncovers strong return reversals in
stock market returns around the last monthly settlement day, T-3, which
guarantees liquidity for month-end cash distributions. We show that these
return reversals are stronger in countries where the mutual fund ownership is
large, and that in the US the return reversals have become stronger over time
as the mutual fund ownership of stocks has increased. Finally, in the
cross-section of stocks, the reversals around turn of the month are stronger
for stocks more commonly held by mutual funds, for liquid stocks, and for more
volatile stocks (controlling for liquidity)."
