Can you capitalize on the turn-of-the-year effect?

• Autores: S. Beyer, Luis Garcia-Feijóo, Gerald R. Jensen
• Localización: Applied financial economics, ISSN 0960-3107, Vol. 23, Nº. 16-18, 2013, págs. 1457-1468
• Idioma: inglés
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• Resumen

  • Previous research identifies evidence of a strong seasonal pattern in returns, whereby returns are systematically higher in January. The most widely advanced explanation for this turn-of-the-year (or January) effect relies on tax-based trading; however, researchers have proposed a variety of alternative explanations. The relevance of the January effect for investors has been questioned due to the inconsistency in the phenomenon. We find evidence indicating that a strategy that targets small, out-of-favour stocks allows investors to achieve superior performance in January. Furthermore, we find that market indicators can be used to improve the consistency of the strategy. Finally, we advance a theory to explain the observed superior performance of the proposed investment strategy.