--%>

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 : Maximization of the Goals of Firm I

    I have a problem in economics on Maximization of the Goals of Firm. Please help me in the following question. The firm’s goal of profit maximization is most distantly analogous to: (i) Revenue maximization by the Internal Revenue Agents. (ii) Ma

  • Q : Increment in production with

    An increase in the production of stereos at similar time that consumers expect a price decline would outcomes in ______ in equilibrium price as well as equilibrium quantity will ______: (w) decrease; be uncertain. (x) increase; be uncertain. (y) decrease; decrease. (z

  • Q : Determine profit per unit of output

    Price minus average total cost i.e., P - ATC equals: (w) total profit. (x) marginal cost. (y) marginal revenue. (z) profit per unit of output. Please choose the right answer from above...I want you

  • Q : Internet connection system in Short Run

    The resource most probable to be viewed as the fixed in short run by a firm which operates a cable TV and Internet connection system would be: (1) Unskilled workers who bury the cable. (2) The personal computer (3) Satellite dishes that it has leased to the customers.

  • Q : Money functions Give me answer of this

    Give me answer of this question. Money functions as: A) a store of value. B) a unit of account. C) a medium of exchange. D) all of the above.

  • Q : How is Economic policy more scientific

    Which of the given LEAST describes the widespread but erroneous view which economists seldom agree: (1) The media focuses upon controversy, not agreement. (2) Political considerations, more than economic logic, find out policies. (3) Some economists may feel obligated

  • Q : Constant cost industry of production

    When Del’s production function and costs are characteristic for wheat farmers and when wheat farming is a constant cost industry, in that case in the long run, there the price of wheat will be: (i) $4 per bushel. (ii) $6 per bushel. (iii) $8 per

  • Q : Determine profit maximizing price The

    The profit-maximizing price for copyrighted smash-hit St. Valentine’s Day software of Prohibition Corporation is: (i) $12 per copy. (ii) $20 per copy. (iii) $24 per copy. (iv) $32 per copy. (v) $40 per copy. <

  • Q : Monopsonistic labor market-wage

    In the monopsonistic labor market in which wage discrimination is not possible, the raise in the minimum wage: (i) Essentially outcomes in less employment and higher wages. (ii) Might result in both the higher level of employment and the higher wage rate. (iii) Unifor

  • Q : Problem on physical export Select the

    Select the right answer of the question. The physical export of motorcycles from the United States to Mexico best illustrates a: A) trade flow. B) resource flow. C) financial flow. D) technology flow.