show that the January effect
was present from 1871-1913, prior to the introduction of personal income taxes, and that it is not confined to small firms.
The average reached a record high of 3,978.36 on January 31, after experiencing a typical "January effect
." However, the Federal open Market Committee triggered an avalanche of sell orders on February 4 when it bumped up short-term interest rates to 3.25%, an increase of 0.25%.
The "January effect
" indicates that the stock market goes up significantly in January compared to other months.
Among the most consistent index stocks that have closed positively in eight of the past 10 years during the January effect
were BDO, which gained an average returns of 3.1 percent; SM Investments, 3.1 percent and Semirara Coal, 3.7 percent.
Other factors include the expectations of timely elections, rise in crude oil prices, appointment of a new economic team in Islamabad and the January effect
. The visit by the minister of state for finance to the PSX on Thursday where he assured members of the exchange's board of his support also helped boost investors' enthusiasm.
The January effect
, Financial Analysts Journal 62(5): 78-88.
Further, Hang and Hirshchy (2006) report that the January effect
continues to exist in small-cap stocks.
Various seasonal anomalies in stock returns have been researched since Rozeff and Kinney (1976) originally presented the January effect
. (1) For example, French (1980) documented the weekend (or Monday) effect, (2) and Ariel (1987) presented the end-of-month (or monthly) effect.
"Professional Portfolio Managers and the January Effect
: Theory and Evidence." Review of Financial Economics, Fall 1994, 4(1), pp.
The last cause for the January Effect
may be the most meaningful.
Explanations offered included the impact of holidays, time zone differences, market age and price, January effect
and mismeasured risk.