Article1992

The January Anomaly: Effects of Low Share Price, Transaction Costs, and Bid-Ask Bias

328 citations0/0 files storedThe Journal of Finance

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Financial Markets and Investment Strategies Corporate Finance and Governance Financial Analysis and Corporate Governance

Abstract

ABSTRACT The January effect is primarily a low‐share price effect and less so a market value effect. In the recent 1977–1986 period, after‐transaction‐cost raw and excess January returns are lower on low‐price stocks than on high‐price stocks. Failure of informed traders to eliminate significantly large before‐transaction‐cost excess January returns on low‐price stocks is potentially explained by higher transaction costs and a bid‐ask bias. At the least, the January anomaly found in prior tests is not persistent, and thereby, not likely to be exploitable by typical investors.

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References

1977Estimating betas from nonsynchronous data 1983Size-related anomalies and stock return seasonality 1981Misspecification of capital asset pricing 1983The anomalous stock market behavior of small firms in January 1983Biases in computed returns 1983Transaction costs and the small firm effect 1984Differential information and the small firm effect 1989Earnings Yields, Market Values, and Stock Returns

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