--%>

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 : Fixed constant cash flows in equal

    Financial instruments which promise fixed constant cash flows at equal time intervals forever are termed as: (1) coupon debentures. (2) perpetuities. (3) perennials. (4) residuals. (5) dividends. Please choose the righ

  • Q : Burden of tax decrement The burden of

    The burden of an excise (i.e., per unit) tax would reduce solely upon consumers of the taxed good within: (w) Panel A. (x) Panel B. (y) Panel C. (z) Panel D.

    Q : Short-run supply curve of a purely

    Short-run supply curve of a purely competitive firm is the positively sloped segment of: (a) its long run sales revenue curve. (b) its marginal fixed cost curve. (c) its average profits curve. (d) its average total cost curve. (e) its MC curve above t

  • Q : Deter entry from potential competitors

    A firm along with important market power which builds an additional plant to increase excess capacity may be trying to as: (w) ignore a depletion of inventory. (x) deter entry from potential competitors. (y) increase demand and thus raise price and pr

  • Q : Distribution of income-inequitable

    Reliance on private demands and supplies to allocate resources and goods is least specific to yield an economically inefficient solution when: (i) producers have significant monopoly power. (ii) a good is nonrival and

  • Q : Imperfectly competitive market A firm

    A firm within an imperfectly competitive market is: (w) more likely to advertise than a purely competitive firm. (x) less probable to advertise than a purely competitive firm. (y) neither more nor less probable to advertise than a pure competitor. (z)

  • Q : Marginal resource cost for a monopsonist

    Can someone help me in finding out the right answer from the given options. The marginal resource cost for the monopsonist in labor market which can’t wage discriminate: (i) Is perfectly elastic. (ii) Lies above the market supply of labor. (iii) Is perfectly ine

  • Q : Normative objectives for microeconomic

    Extensively accepted normative objectives for microeconomic comprise: (1) full employment and balanced economic development. (2) a stable price level and maximum purchasing power. (3) efficiency, equity and freedom. (4) job security and equality within the distributio

  • Q : Price discriminate raises output and

    When a monopolist which does not price discriminate raises its output, the firm’s total revenue: (w) should rise. (x) will rise when demand is elastic. (y) will rise when demand is inelastic. (z) will rise when marginal revenue = 0.

  • Q : Production-Altering the chemical and

    Can someone please help me in finding out the accurate answer from the following question. The production which modifies the chemical or physical structures of a good produces utilities of: (1) Substance. (2) Place and time. (3) Form. (4) Possession.