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Matt's Market Insights


With the end of December in sight, I've been wondering how likely it is we will see the typical "January effect." For those who may not be familiar with the term, it refers to a general increase in stock prices during January, which is attributed to a reversal of the tax-loss selling often seen in December. The effect is usually most pronounced in small-cap stocks that performed poorly during the prior year.


In recent years the January effect has been less noticeable as more and more investors have adjusted to it. A drive towards using tax-sheltered accounts has also reduced the effect to some degree.


A study performed by Barclay's looked at this effect during the period from 1986 to 2012. It found that a group comprised of the 5% worst-performing small-cap stocks produced stronger returns during January (by approximately 1.2%) than the Russell 2000 index. This outperformance was seen across the full ... Log in or subscribe to continue reading.

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