The January effect (also known as the turn-of-the-year effect or the January anomaly) is the most important calendar anomaly. The returns on common stocks in January are much higher than in other months, and this phenonenon is due to smaller-capitalization stocks in the early days of the month.
KEIM, Donald B., 1983. Size-related anomalies and stock return seasonality : Further empirical evidence, Journal of Financial Economics, Volume 12, Issue 1, June 1983, Pages 13-32. [Cited by 259] (10.66/year)
Abstract: "This study examines, month-by-month, the empirical relation between abnormal returns and market value of NYSE and AMEX common stocks. Evidence is provided that daily abnormal return distributions in January have large means relative to the remaining eleven months, and that the relation between abnormal returns and size is always negative and more pronounced in January than in any other month — even in years when, on average, large firms earn larger risk-adjusted returns than small firms. In particular, nearly fifty percent of the average magnitude of the ‘size effect’ over the period 1963–1979 is due to January abnormal returns. Further, more than fifty percent of the January premium is attributable to large abnormal returns during the first week of trading in the year, particularly on the first trading day."
LAKONISHOK, Josef and Seymour SMIDT, 1988. Are seasonal anomalies real? A ninety-year perspective, The Review of Financial Studies, Vol. 1, No. 4. (Winter, 1988), pp. 403-425. [Cited by 161] (8.80/year)
Abstract: "This study uses 90 years of daily data on the Dow Jones Industrial Average to test for the existence of persistent seasonal patterns in the rates of return. Methodological issues regarding seasonality tests are considered. We find evidence of persistently anomalous returns around the turn of the week, around the turn of the month, around the turn of the year, and around holidays."
REINGANUM, Marc R., 1983. The anomalous stock market behavior of small firms in January : Empirical tests for tax-loss selling effects, Journal of Financial Economics, Volume 12, Issue 1, June 1983, Pages 89-104. [Cited by 170] (7.30/year)
Abstract: "Small firms experience large returns in January and exceptionally large returns during the first few trading days of January. The empirical tests indicate that the abnormally high returns witnessed at the very beginning of January appear to be consistent with tax-loss selling. However, tax-loss selling cannot explain the entire January seasonal effect. The small firms least likely to be sold for tax reasons (prior year ‘winners’) also exhibit large average January returns, although not unusually large returns during the first few days of January."
AGRAWAL, Anup and Kishore TANDON, 1994. Anomalies or illusions? Evidence from stock markets in eighteen countries, Journal of International Money and Finance, Volume 13, Issue 1, February 1994, Pages 83-106. [Cited by 75] (6.10/year)
Abstract: "This paper examines five seasonal patterns in stock markets of eighteen countries: the weekend, turn-of-the-month, end-of-December, monthly and Friday-the-thirteenth effects. We find a daily seasonal in nearly all the countries, but a weekend effect in only nine countries. Interestingly, the daily seasonal largely disappears in the 1980s. The last trading day of the month has large returns and low variance in most countries. Many countries have large December pre-holiday and inter-holiday returns. The January returns are large in most countries and a significant monthly seasonal exists in ten countries."
POTERBA, James M. and Scott J. WEISBENNER, 2001. Capital Gains Tax Rules, Tax-Loss Trading, and Turn-of-the-Year Returns, The Journal of Finance, Vol. 56, No. 1. (Feb., 2001), pp. 353-368. [Cited by 32] (6.05/year)
Abstract: "Changes in the capital gains tax rules facing individual investors do not affect the incentives for “window dressing” by institutional investors, but they can affect the incentives for year-end tax-induced trading by individual investors. Empirical evidence for the 1963 to 1996 period suggests that when the tax law encouraged taxable investors who accrued losses early in the year to realize their losses before year-end, the correlation between early year losses and turn-of-the-year returns was weaker than when the law did not provide such an early realization incentive. These findings suggest that tax-loss trading contributes to turn-of-the-year return patterns."
CONSTANTINIDES, George M., 1984. Optimal stock trading with personal taxes : Implications for prices and the abnormal January returns, Journal of Financial Economics, Volume 13, Issue 1, March 1984, Pages 65-89. [Cited by 128] (5.74/year)
Abstract: "The tax law confers upon the investor a timing option - to realize capital losses and defer capital gains. With the tax rate on long term gains and losses being about half the short term rate, the law provides a second timing option - to realize losses short term and gains long term, if at all. Our theory and simulation over the 1962–1977 period establish that taxable investors should realize long term gains in high variance stocks and repurchase stock in order to realize potential future losses short term. Tax trading does not explain the small-firm anomaly but predicts a seasonal pattern in trading volume which maps into a seasonal pattern in stock prices, the January anomaly, only if investors are irrational or ignorant of the price seasonality."
ROLL, R., 1983. Vas ist das? The turn-of-the-year effect and the return premia of small firms, Journal of Portfolio Management, Winter, Vol. 9 Issue 2, pages 18-28. [Cited by 131] (5.62/year)
Abstract: "Stock returns for small and large firms reveals a pattern in that average returns are high in general and the average returns of small firms are invariably greater than the average returns of large firms. The pattern cannot be explained by data errors, listings, de-listings or outliers. Instead, it is closely associated with tax loss selling inducd by negative returns over the previous year. Transaction costs and low liquidity probably prevent arbitrageurs from eliminating the return seasonality. The tradition of efficient markets is applied to provide arguments concerning the large average return difference between small and large firms. The presence of the seasonality creates a substantial econometric problem in measuring systematic risk and in testing risk/return relationships."
SIAS, Richard W. and Laura T. STARKS, 1997. Institutions and Individuals at the Turn-of-the-Year, The Journal of Finance, Vol. 52, No. 4. (Sep., 1997), pp. 1543-1562. [Cited by 52] (5.60/year)
Abstract: "This article evaluates the tax-loss-selling hypothesis against the window-dressing hypothesis as explanations for turn-of-the-year anomalies. We examine differences between securities dominated by individual investors versus those dominated by institutional investors and find that the effect is more pervasive in the former. Controlling for capitalization, we find that in early January (late December), stocks with greater individual investor interest outperform (underperform) stocks with greater institutional investor interest. These results hold for both stocks that previously appreciated in value and stocks that previously depreciated in value. The results are most consistent with the tax-loss-selling hypothesis as an explanation for the turn-of-the-year effect."
BHARDWAJ, Ravinder K. and Leroy D. BROOKS, 1992. The January Anomaly: Effects of Low Share Price, Transaction Costs, and Bid-Ask Bias, The Journal of Finance, Vol. 47, No. 2. (Jun., 1992), pp. 553-575. [Cited by 72] (5.04/year)
Abstract: "The January effect is primarily a low-share price effect and less so a market value effect. In the recent 1977–1986 period, after-transaction-cost raw and excess January returns are lower on low-price stocks than on high-price stocks. Failure of informed traders to eliminate significantly large before-transaction-cost excess January returns on low-price stocks is potentially explained by higher transaction costs and a bid-ask bias. At the least, the January anomaly found in prior tests is not persistent, and thereby, not likely to be exploitable by typical investors."
SULLIVAN, Ryan, Allan TIMMERMANN and Halbert WHITE, 2001. Dangers of data mining: the case of calendar effects in stock returns, Journal of Econometrics, Volume 105, Issue 1, November 2001, Pages 249-286. [Cited by 41] (4.95/year)
Abstract: "Economics is primarily a non-experimental science. Typically, we cannot generate new data sets on which to test hypotheses independently of the data that may have led to a particular theory. The common practice of using the same data set to formulate and test hypotheses introduces data-mining biases that, if not accounted for, invalidate the assumptions underlying classical statistical inference. A striking example of a data-driven discovery is the presence of calendar effects in stock returns. There appears to be very substantial evidence of systematic abnormal stock returns related to the day of the week, the week of the month, the month of the year, the turn of the month, holidays, and so forth. However, this evidence has largely been considered without accounting for the intensive search preceding it. In this paper we use 100 years of daily data and a new bootstrap procedure that allows us to explicitly measure the distortions in statistical inference induced by data mining. We find that although nominal p-values for individual calendar rules are extremely significant, once evaluated in the context of the full universe from which such rules were drawn, calendar effects no longer remain significant."
GULTEKIN, Mustafa N. and N. Bulent GULTEKIN, 1983. Stock Market Seasonality: International Evidence, Journal of Financial Economics, Volume 12, Issue 4, December 1983, Pages 469-481. [Cited by 110] (4.72/year)
Abstract: "This study examines empirically stock market seasonality in major industrialized countries. Evidence is provided that there are strong seasonalities in the stock market return distributions in most of the capital markets around the world. The seasonality, when it exists, appears to be caused by the disproportionately large January returns in most countries and April returns in the U.K. With the exception of australia, these months also coincide with the turn of the tax year."
RITTER, Jay R., 1988. The Buying and Selling Behavior of Individual Investors at the Turn of the Year, The Journal of Finance, Vol. 43, No. 3, Papers and Proceedings of the Forty-Seventh Annual Meeting of the American Finance Association, Chicago, Illinois, December 28-30, 1987. (Jul., 1988), pp. 701-717. [Cited by 83] (4.54/year)
Abstract: "The average returns on low-capitalization stocks are unusually high relative to those on large-capitalization stocks in early January, a phenomenon known as the turn-of-the year effect. This paper finds that the ratio of stock purchases to sales by individual investors displays a seasonal pattern, with individuals having a below-normal buy/sell ratio in late December and an above-normal ratio in early January. Year-to-year variation in the early January buy/sell ratio explains forty-six percent of the year-to-year variation in the turn-of-the-year effect during 1971-1985."
KEIM, D.B., 1989. Trading patterns, bid-ask spreads, and estimated security returns : The case of common stocks at calendar turning points, Journal of Financial Economics, Volume 25, Issue 1 , November 1989, Pages 75-97. [Cited by 70] (4.05/year)
Abstract: "Returns computed with closing bid or ask prices that may not represent ‘true’ prices introduce measurement error into portfolio returns if investor buying and selling display systematic patterns. This paper finds systematic tendencies for closing prices to be recorded at the bid in December and at the ask in early January. After changing bid and ask prices are controlled for. this pattern results in large portfolio returns on the two trading days surrounding the end of the year, especially for low-price stocks. Other temporal return patterns (e.g. weekend and holiday effects) are also related to systematic trading patterns."
HAWAWINI, G. and D.B. KEIM, 1995. On the predictability of common stock returns: World-wide evidence. In: Handbooks in Operations Research and Management Science, Volume 9, Finance, pages 497-544. [Cited by 58] (4.06/year)
Abstract: "Recent empirical findings suggest that equity returns are predictable. These findings document persistent cross- sectional and time series patterns in returns that are not predicted by extant theory, and are, therefore, often classified as anomalies. In this paper we synthesize the evidence on predictable returns, focusing on the subset of the findings whose existence has proved most robust with respect to both time and the number of stock markets in which they have been observed."
ROZEFF, Michael S. and William R. KINNEY, Jr., 1976. Capital Market Seasonality: The Case of Stock Returns, Journal of Financial Economics, Volume 3, Issue 4, October 1976, Pages 379-402. [Cited by 122] (4.03/year)
Abstract: "In this paper we present evidence on the existence of seasonality in monthly rates of return on the New York Stock Exchange from 1904–1974. With the exception of the 1929–1940 period, there are statistically significant differences in mean returns among months due primarily to large January returns. Dispersion measures reveal no consistent seasonal patterns and the characteristic exponent seems invariant among months. We also explore possible implications of the observed seasonality for the capital asset pricing model and other research."
BARRY, C.B. and S.J. BROWN, 1984. Differential information and the small firm effect. Journal of Financial Economics. [Cited by 87] (3.90/year)
TINIC, S.M. and R.R. WEST, 1984. Risk and return: January vs. the rest of the year. Journal of Financial Economics, 13, 561-74. [Cited by 42] (1.88/year)
LAKONISHOK, J. and S. SMIDT, 1984. Volume and Turn-of-the-Year Behavior. Journal of Financial Economics. [Cited by 35] (1.57/year)
KAMSTRA, M.J., L.A. KRAMER and M.D. LEVI, 2000. Winter blues: Seasonal affective disorder (SAD), the january effect, and stock market returns. Faculty of Commerce, University of British Columbia Working …. [Cited by 8] (1.27/year)
THALER, R.H., 1987. Amomalies: The January Effect. The Journal of Economic Perspectives, Vol. 1, No. 1 (Summer, 1987), pp. 197-201. [Cited by 18] (0.93/year)
RIEPE, M., 1998. Is Publicity Killing the January Effect?. Journal of Financial Planning. [Cited by 5] (0.60/year)
OFFICER, R.R., 1975. Seasonality in Australian capital markets : Market efficiency and empirical issues, Journal of Financial Economics, Volume 2, Issue 1, March 1975, Pages 29-51. [Cited by 19] (0.59/year)
Abstract: "Following a report of a possible seasonal in Australian share prices [Praetz (1973)], a study was made of the behaviour of share returns using different data and methodology to that of the original report. The test included forecasts of the seasonal using Box and Jenkins methods. Although the results indicate some evidence of a seasonal, it is shown that this is not prima facie evidence of market inefficiency. It is suggested that a more likely explanation is related to the structure of the economy, e.g., changing opportunity cost of money through the year."
JONES, C.P. and J.W. WILSON, 1989. An Analysis of the January Effect in Stocks and Interest Rates Under Varying Monetary Regimes. The Journal of Financial Research. [Cited by 10] (0.58/year)
BOOTH, D.G. and D.B. KEIM, 2000. Is There Still a January Effect?. Security Market Imperfections in Worldwide Equity Markets ( …. [Cited by 3] (0.48/year)
EAKINS, S. and S. SEWELL, 1993. Tax-Loss Selling, Institutional Investors, and the January Effect: A Note. Journal of Financial Research. [Cited by 6] (0.45/year)
NASSIR, A.M. and S. MOHAMMAD, 1987. The January Effect of Stocks Traded on the Kuala Lumpur Stock Exchange: An Empirical Analysis'. Hong Kong Journal of Business Management. [Cited by 5] (0.26/year)
KEIM, D.B., 1986. Dividend Yields and the January Effect. Journal of Portfolio Management, Winter, 54-60. [Cited by 5] (0.25/year)
DHALIWAL, D. and R. TREZEVANT, 1993. Capital gains and turn-of-the-year stock price pressures. Advances in Quantitative Analysis of Finance and Accounting. [Cited by 2] (0.15/year)
SEHUN, N., 1993. Can Omitted Risk Factors Explain the January Effect?. A Stochastic Dominance Approach,'Journal of Financial and …. [Cited by 2] (0.15/year)
KEIM, D., 1986. Dividend Yields, Size and the January Effect. Journal of Portfolio Management. [Cited by 3] (0.15/year)
AMMONS, A.R., 1972. Tape for the Turn of the Year. WW Norton. [Cited by 5] (0.15/year)
BERGES, A., J.J. MCCONNELL and G.G. SCHLARBAUM, 1984. An investigation of the turn-of-the-year eVect, the small? rm eVect and the tax-loss-selling- …. Journal of Finance. [Cited by 3] (0.13/year)
KEIM, D., 1989. … , Bid-Ask Spreads and Estimated Security Returns: The Case of Common Stocks at the Turn of the Year, …. Journal of Financial Economics. [Cited by 2] (0.12/year)
WILSON, J., 1987. Can tax loss selling explain the January effect. Journal of Finance. [Cited by 2] (0.10/year)
LAKONISHOK, J. and S. SMIDT, 1984. Turn-of the year behavior. Journal of Financial Economics. [Cited by 2] (0.09/year)
ROLL, R., 1983. The-turn-of-the-year eVect and the return premia of small? rms. Journal of Portfolio Management. [Cited by 2] (0.09/year)
FRENCH, D.W. and C. BALANCES, 1994. the January Effect in Stock Returns.''. Quarterly Journal of Business and Economics. [Cited by 1] (0.08/year)
CHEN, L.L. and S.M. MOVEMENTS, 1994. the January Effect.''. Atlantic Economic Journal. [Cited by 1] (0.08/year)
BERGES, A., Moconnell and G Schlarbaum, 1984, The-Turn-of-the-Year in Canada. The Journal of Finance. [Cited by 2] (?/year)
OGDEN, J.P., lip;. Seasonality in Aggregate Personal Income Growth and the January Effect.''. Working paper, Jacobs Center for Management Studies, State &h. [Cited by 2] (?/year)
DYL, E.A., Maberly (1992),Odd-Lot Transactions around the Turn of the Year and the January Effect'. Journal of Financial and Quantitative Analysis (December). [Cited by 1] (?/year)