The January Effect and Small-Cap Stocks
Ho, Shen-Loon (2024-12-19)
The January Effect and Small-Cap Stocks
(19.12.2024)
Julkaisu on tekijänoikeussäännösten alainen. Teosta voi lukea ja tulostaa henkilökohtaista käyttöä varten. Käyttö kaupallisiin tarkoituksiin on kielletty.
suljettu
Julkaisun pysyvä osoite on:
https://urn.fi/URN:NBN:fi-fe202501102307
https://urn.fi/URN:NBN:fi-fe202501102307
Tiivistelmä
The January Effect refers to a well-known phenomenon in financial markets where stock prices, particularly those of small-cap stocks, tend to rise during the first month of the year. This seasonal pattern is often attributed to a combination of factors, including year-end tax-loss selling and investor optimism as a new year begins. The January Effect is most noticeable in the early part of January, as investors return from the holiday season and adjust their portfolios. While it is not guaranteed to occur every year, the January Effect has been a widely discussed concept among traders and market analysts for decades, prompting investors to consider its potential influence on short-term market movements.
This thesis is a literature review that examines the January effect and specifically, it investigates whether the January effect exist in small-cap stocks, and explores the various explanations proposed for this phenomenon.
The results of this literature review highlight the complex nature of the January effect and provide valuable insights into its persistence and underlying causes. The review of empirical studies indicates that the January effect, particularly in small-cap stocks, was a consistent and significant anomaly during the 20th century. Early studies showed robust evidence of unusually high returns in January, especially in the first few trading days, with small-cap stocks experiencing the most pronounced gains. However, more recent studies suggest a weakening of the January effect, particularly after the 1987 stock market crash.
The thesis also sheds light on the various explanations proposed for the January effect. Despite these explanations, no single factor fully accounts for the January effect. Instead, the results suggest that it is likely the result of a combination of these factors, working together to create the observed anomaly. The thesis points to the need for further research to better understand how these factors interact and evolve in response to changing market conditions.
This thesis is a literature review that examines the January effect and specifically, it investigates whether the January effect exist in small-cap stocks, and explores the various explanations proposed for this phenomenon.
The results of this literature review highlight the complex nature of the January effect and provide valuable insights into its persistence and underlying causes. The review of empirical studies indicates that the January effect, particularly in small-cap stocks, was a consistent and significant anomaly during the 20th century. Early studies showed robust evidence of unusually high returns in January, especially in the first few trading days, with small-cap stocks experiencing the most pronounced gains. However, more recent studies suggest a weakening of the January effect, particularly after the 1987 stock market crash.
The thesis also sheds light on the various explanations proposed for the January effect. Despite these explanations, no single factor fully accounts for the January effect. Instead, the results suggest that it is likely the result of a combination of these factors, working together to create the observed anomaly. The thesis points to the need for further research to better understand how these factors interact and evolve in response to changing market conditions.