The January Effect: Still There after All These Years

Abstract

The year-end disturbance in the prices of small stocks that has come to be known as the January effect is arguably the most celebrated of the many stock market anomalies discovered during the past two decades. If this anomaly is exploitable and if the stock market is reasonably efficient, one would expect that opportunity would have been priced away by now. Evidence indicates, however, that the January effect is still going strong 17 years after its discovery. The magnitude of the effect has not changed significantly, and no significant trend portends its eventual disappearance. Because the anomaly can be inexpensively exploited, its persistence has implications for the theory of efficient markets and for the persistence of anomalies in general.

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