January Effect
2020-01-06 22:47

What Is the January Effect? 


The January Effect is a perceived seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off. Another possible explanation is that investors use year-end cash bonuses to purchase investments the following month.


Key Takeaways


  • The January Effect is the seasonal tendency for stocks to rise in that month.
  • From 1928 through 2018, the S&P 500 rose 62% of the time in January (56 times out of 91).
  • The January Effect is theorized to occur when investors sell winners to incur year-end capital gains taxes in December and use those funds to speculate on weaker performers.
  • Like other market anomalies and calendar effects, the January Effect is considered by some to be evidence against the efficient markets hypothesis.
  • “一月效应”指的是当月股市上涨的季节性趋势。
  • 从1928年到2018年,标准普尔500指数在1月份上涨62%(在91次中上涨了56次)。
  • 从理论上讲,一月效应发生在12月份,当时投资者卖出赢家股票,缴纳年底资本利得税,然后用这些资金对表现较差的股票进行投机。
  • 与其它市场异常现象和日历效应一样,一些人认为一月效应是与效率市场假说相悖的证据。

Understanding the January Effect 


The January Effect is a hypothesis, and like all calendar-related effects, suggests that the markets as a whole are inefficient, as efficient markets would naturally make this effect non-existent. The January Effect seems to affect small caps more than mid or large caps because they are less liquid.


Since the beginning of the 20th century, the data suggests that these asset classes have outperformed the overall market in January, especially toward the middle of the month. Investment banker Sidney Wachtel first noticed this effect in 1942. This historical trend, however, has been less pronounced in recent years because the markets seem to have adjusted for it.

数据显示,自20世纪初以来,这些资产类别在1月份的表现一直好于整体市场,尤其是接近1月中旬的时候。投资银行家(Sidney Wachtel)在1942年首次注意到这种效应。然而,这一历史趋势近年来已不那么明显,因为市场似乎已为此进行了调整。

Another reason analysts consider the January Effect less important as of 2018 is that more people are using tax-sheltered retirement plans and therefore have no reason to sell at the end of the year for a tax loss.


January Effect Explanations 


Beyond tax-loss harvesting and repurchases, as well as investors putting cash bonuses into the market, another explanation for the January Effect has to do with investor psychology. Some investors believe that January is the best month to begin an investment program or perhaps are following through on a New Year's resolution to begin investing for the future.


Others have pontificated that mutual fund managers purchase stocks of top performers at the end of the year and eliminate questionable losers for appearance sake in their year-end reports, an activity known as "window dressing." This is unlikely, however, as the buying and selling would primarily affect large caps.


Other evidence supporting the idea that individuals sell for tax purposes includes a study by D'Mello, Ferris, and Hwang (2003), which found increased selling for stocks that experienced heavy capital losses before the end of the year and more selling of stocks with capital gains after the start of the year. Further, the trade size for stocks with large capital losses tends to decrease before year-end and for capital gains after the start of the year.

其他支持个人出于税收目的出售这个想法的证据包括一个D'Mello, Ferris, and Hwang(2003)的研究,该研究发现了年底前严重资本亏损的股票抛盘增加,年初后具有资本收益的股票抛盘增加。此外,资本损失较大的股票的交易规模在年底前趋于下降,而资本利得较大的股票的交易规模则在年初后趋于下降。

Year-end sell-offs also attract buyers interested in the lower prices, knowing the dips are not based on company fundamentals. On a large scale, this can drive prices higher in January.


Studies and Criticism 


One study, analyzing data from 1904 to 1974, concluded that the average return for stocks during the month of January was five times greater than any other month during the year, particularly noting this trend existed in small-capitalization stocks. The investment firm Salomon Smith Barney performed a study analyzing data from 1972 to 2002 and found that the stocks of the Russell 2000 index outperformed stocks in the Russell 1000 index (small-cap stocks versus large-cap stocks) in the month of January.

其中一项研究分析了1904年至1974年的数据,得出结论说,1月份股票的平均回报率是一年内其他月份的五倍,特别是小盘股。投资公司所罗门美邦(Salomon Smith Barney)对1972年至2002年的数据进行了分析,发现1月份罗素2000指数(Russell 2000 index)的股票表现优于罗素1000指数(Russell 1000 index)的股票(小盘股优于大盘股)。

This outperformance was by 0.82%, yet these stocks underperformed during the remainder of the year. Data suggest that the January Effect is becoming increasingly less prominent.


An ex-Director from the Vanguard Group, Burton Malkiel, the author of "A Random Walk Down Wall Street," has criticized the January Effect, stating that seasonal anomalies such as it don't provide investors with any reliable opportunities. He also suggests that the January Effect is so small that the transaction costs needed to exploit it essentially make it unprofitable. It's also been suggested that too many people now time for the January Effect so that it becomes priced into the market, nullifying it all together.

《漫步华尔街》(A Random Walk Down Wall Street)一书的作者,美国先锋集团(Vanguard Group)前董事伯顿·马尔基尔(Burton Malkiel)对1月效应提出了批评,他说,这种季节性反常现象不会给投资者提供任何可靠的机会。他还指出,1月份的影响是如此之小,以至于利用它所需要的交易成本基本上使其无利可图。还有人说,现在有太多人在等待1月效应的到来,所以1月效应在市场上的价格会被消化,从而使1月效应完全失效。

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