--%>

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 : What will occur when government taxes a

    When the government taxes a good, the price consumers currently face is most probably: (w) higher than before the tax. (x) below the price the seller receives. (y) less than average production cost. (z) justified through welfare payments to taxpayers.

    Q : Equilibrium price of commodity Describe

    Describe why the equilibrium price of commodity is determined at the level of output at which its demand equavalents its supply.

  • Q : Shift responsibility for all flawed

    Can someone please help me in finding out the accurate answer from the following question. The directors of garage sales may attempt to shift the responsibility for all the flawed purchases to buyers by posting signs which state: (i) No trespassing. (ii) Carpe diem. (

  • Q : Choosing a statistical Model Choosing a

    Choosing a statistical Model: A number of problems arise in determining whether the work is truly rigorous or not. It is important to determine whether the model chosen makes theoretical and intuitive sense. <

  • Q : Determine absolute value of price

    Since this demand curve for DVD games is a straight line, and its slope: (w) is constant, although the absolute value of price elasticity of demand falls as output increases. (x) varies to compensate for changes within elasticity. (y) is constant, alt

  • Q : World price in market When for wheat

    When for wheat the world price is $10 per bushel, and Del, who one owns the biggest wheat farm into North Dakota, will work at: (i) point a. (ii) point b. (iii) point c. (iv) point d. (v) point f.

    Q : Complete equilibrium by distribution of

    When the economy was in a complete equilibrium, in that case the distribution of income would be precisely proportional to the distribution of: (a) taxation. (b) inheritance. (c) luck. (d) wealth.

  • Q : Problem on Substitution effect for good

    One of my friend has a problem on substitution effect. The original equilibrium point (that is utility-maximizing bundle) in the graph shown below is at point A. The price of good Y is increased, pivoting the budget constraint down to its latest level.a. F

  • Q : Transaction Costs and the Survival of

    Can someone help me in finding out the right answer from the given options. The firms can be successful and survive in long run merely when they consistently: (1) Produce positive economic gains. (2) Comply completely with federal regulations. (3) Ignore managerial sl

  • Q : Price cross elasticity of demand among

    A 2 percent price cut for doodads causes gizmo sales to fall by 3 percent. The price cross elasticity of demand among these goods is approximately _____ and such goods are _____. (w)  2/3, substitutes. (x) 1.5, substitutes. (y) 2/3, complements.