--%>
Assignment Help - homework help

Small market capitalization

Why would stocks perform better in the month of January than other months of the year, and discuss whether small market capitalization companies outperform large capitalization companies in the short to medium term?

E

Expert

Verified

January effect is the calendar-related anomaly in the financial market where financial security prices raise in the month of January. This makes an opportunity for the investors to buy stock for lower prices before January and sell them after their value rises. Therefore, the main characteristics of the January Effect are an increase in buying securities before the end of the year for a lower price, and selling them in January to produce profit from the price differences. This kind of pattern in price behavior on the financial market supports the fact that financial markets are not completely efficient.The January effect is perhaps the most accepted seasonal anomaly. In an early paper, Rozeff and Kinney (1976) found evidence for abnormally high returns in January using returns on the NYSE index between 1904 and 1974. The most popular explaination for this is the well known tax-loss selling motivation. Because the high correlation of international stock markets with the US market one would expect to that the January effect in the US data is transmitted towards international data. Between 1960 and 1976 the average January return was 0.14%. In this period the returns in January were significantly higher than in other months. Between 1976 and 2003, January essentially generated the same average return as any other day (t¼ 0.37). Right after 1976, the year of the publication of Rozeff and Kinney (1976) report about the January effect, the strength of the effect dropped immensely.

   Related Questions in Microeconomics

  • Q : Giving wholesale price per dozen by

    When Rose Garden Wholesalers has a typical type cost structure of rose farms within this purely competitive industry, into the long run new competitors would most likely enter the market providing the wholesale price

    		•
  • Q : Proportion of total costs I have a

    I have a problem in economics on Proportion of total costs. Please help me in the following question. Demand for the labor is more elastic as the: (1) Bigger labor costs is as proportion of net costs. (2) Shorter the time-interval considered. (3) Bigg

    		•
  • Q : Regulatory barrier to entry Billy

    Billy recently invented and in that case patented a motorized flying skateboard which transports people to and from their destinations in less than half the time this would take to ride or drive a bus. Billy is protected from competition from a: (1) regulatory barrier

    		•
  • Q : Expectations and Demand problem The

    The demand for durable consumer good tends to rise if: (1) Supply rises. (2) Aggregate expenses rise. (3) Consumers predict price hikes or scarcities in the future. (3) Consumers predict surpluses in future. Choose the precise answ

    		•
  • Q : Demand in price inelastic region

    HoloIMAGine will never deliberately generate and sell holographic technology at an output level where is: (w) marginal revenue [MR] is positive. (x) demand is in a price-elastic region. (y) marginal revenue [MR] is falling. (z) demand is in a price-in

    		•
  • Q : Profit maximizing strategy Prohibition

    Prohibition Corporation would exactly break-even on its St. Valentine’s Day software when, in place of correctly identifying its profit maximizing strategy, this: (1) operated at point i, charging just $20 per copy and producing

    		•
  • Q : Efficient price of a good by vantage

    The allocatively efficient price of a good by the vantage point of society is the price which equals the: (w) average social cost of producing this. (x) average variable cost of producing this. (y) total social cost of producing this. (z) marginal soc

    		•
  • Q : Define deficient demand or deflationary

    Define deficient demand or deflationary gap: Deficient demand occur whenever AD is less than AS at the level of full employment equilibrium

    		•
  • Q : Define primary deficit Primary deficit

    Primary deficit: Primary deficit is the difference among fiscal deficit and interest payments prepared by the government Primary deficit = Fiscal deficit – Interest payments

  • Q : Surviving for maximum profits in

    Supposing that the competitive firms should seek the maximum profits to survive signifies that: (1) Firm do not make trial-and-error decisions. (2) Each and every firm always seeks the maximum gain and nothing else. (3) Competition is very profitable.

    		•