--%>

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 : Problem regarding Inferior Goods

    Subsequent to Fred received a promotion and a big raise; he bought some macaroni and cheese dinners. For Fred, the: (1) Demand for the macaroni and cheese dinners is not predictable. (2) Macaroni and cheese dinners are the normal goods. (3) Demand for cheese and macar

  • Q : Demonstrates the Lorenz Curve This

    This given figure demonstrates as: (w) Lorenz curve. (x) familial income distribution graph. (y) Gini curve. (z) Blanc income standard curve. </span></p>
                                        </div>
                                        <!-- /comment-box -->
                                    </li>
   
   </td>
	</tr><tr>
		<td>
       
      <li>
                                        <div class=

    Q : Predictable results of unexpected

    Predictable results of unexpected development of demand for a competitively produced good comprise increases and in that case gradual decreases in the: (w) price of the good and the profits of producers. (x) consumer surplus derived from the good. (y)

  • Q : Define the term privatization What do

    What do you mean by the term privatization?

  • Q : Least commonly finance investment in

    Business firms least commonly finance investment within new economic capital by: (w) retained earnings. (x) the issuance of common or preferred stocks. (y) borrowing from banks or other financial institutions. (z) gra

  • Q : Taxes on pure land rent Taxes on pure

    Taxes on pure land rents: (1) especially distort economic behavior. (2) are forward shifted to consumers. (3) transfer income from the public treasury to private landowners. (4) are allocatively neutral relative to most alternative taxes. (5) are over

  • Q : Equilibrium price in setting minimum

    Setting a minimum price floor above the equilibrium price will: (w) raise the equilibrium price. (x) create excess demand at the minimum price. (y) create excess supply at the minimum price. (z) clear the market at the minimum price.<

  • Q : Meaning of tax Meaning of tax : Tax is

    Meaning of tax: Tax is a legally compulsory payment imposed on the people by the government. There are two kinds of taxes: Direct taxes and Indirect taxes.

  • Q : Problem on Agency Shop The union

    The union strategy which prevents the non-union employees of the firm from being free riders is to negotiate a contract which needs the firm to be a/an: (i) Agency shop. (ii) Open shop. (iii) Collective bargaining shop. (iv) Closed shop. (v) Union shop.

  • Q : Derived Demand for resources I have a

    I have a problem in economics on Derived Demand for resources. Please help me in the following question. As demands for the resources ultimately based on consumer’s demands for goods then the demand for labor is: (1) Termed as a derived demand.