{"id":58,"date":"2015-12-18T13:54:34","date_gmt":"2015-12-18T13:54:34","guid":{"rendered":"http:\/\/www.sugata.in\/?p=58"},"modified":"2016-01-16T18:54:47","modified_gmt":"2016-01-16T18:54:47","slug":"the-january-effect","status":"publish","type":"post","link":"http:\/\/www.sugata.in\/index.php\/2015\/12\/18\/the-january-effect\/","title":{"rendered":"The January Effect"},"content":{"rendered":"<p>The January Effect refers to the observation that stock returns appear much higher in January than other months. There&#8217;s a beautiful wiki on the effect (\u00a0<a href=\"https:\/\/en.wikipedia.org\/wiki\/January_effect\">https:\/\/en.wikipedia.org\/wiki\/January_effect<\/a> ) so I won&#8217;t go into much detail on it, except to say that:<\/p>\n<p>1. The first thing that came to my mind regarding this effect is taxes &#8211; people sell in December to harvest tax losses\/gains and then rebuy in January<\/p>\n<p>2. From my understanding, this effect may no longer exist &#8211; papers come out both ways on this with recent data.<\/p>\n<p>3. Here&#8217;s what Equities Lab has to say about the issue.I ran three backtests &#8211; all used data from Jan 1 2000 to today, had a monthly rebalance over all stocks (including illiquid small stocks) &#8211; the first does all months, the second does all months except January and the third does January only.<\/p>\n<p><a href=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/allstocksjan.jpg\"><img loading=\"lazy\" class=\"alignnone size-full wp-image-59\" src=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/allstocksjan.jpg\" alt=\"allstocksjan\" width=\"502\" height=\"207\" srcset=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/allstocksjan.jpg 502w, http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/allstocksjan-300x124.jpg 300w\" sizes=\"(max-width: 502px) 100vw, 502px\" \/><\/a><\/p>\n<p><a href=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/nonjan.jpg\"><img loading=\"lazy\" class=\"alignnone size-full wp-image-60\" src=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/nonjan.jpg\" alt=\"nonjan\" width=\"521\" height=\"201\" srcset=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/nonjan.jpg 521w, http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/nonjan-300x116.jpg 300w\" sizes=\"(max-width: 521px) 100vw, 521px\" \/><\/a><\/p>\n<p><a href=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/janonly.jpg\"><img loading=\"lazy\" class=\"alignnone size-full wp-image-62\" src=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/janonly.jpg\" alt=\"janonly\" width=\"485\" height=\"205\" srcset=\"http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/janonly.jpg 485w, http:\/\/www.sugata.in\/wp\/wp-content\/uploads\/2015\/12\/janonly-300x127.jpg 300w\" sizes=\"(max-width: 485px) 100vw, 485px\" \/><\/a><\/p>\n<p>To compare the three, we can normalize everything to 12 month returns &#8211;<\/p>\n<p>All months annual returns = 1.0055^12 &#8211;&gt; <span style=\"text-decoration: underline;\"><strong>6.8%<\/strong><\/span><\/p>\n<p>Non January returns = (1.0048^(12\/11))^12 &#8211;&gt; <span style=\"text-decoration: underline;\"><strong>6.5%<\/strong><\/span><\/p>\n<p>January only returns = (1.0007^(12\/1))^12 &#8211;&gt; <span style=\"text-decoration: underline;\"><strong>10.6%<\/strong><\/span><\/p>\n<p>In light of this evidence, I think there&#8217;s a case to be made that some version of the January Effect still exists.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The January Effect refers to the observation that stock returns appear much higher in January than other months. There&#8217;s a beautiful wiki on the effect (\u00a0https:\/\/en.wikipedia.org\/wiki\/January_effect ) so I won&#8217;t go into much detail on it, except to say that: 1. The first thing that came to my mind regarding this effect is taxes &#8211; [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/posts\/58"}],"collection":[{"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/comments?post=58"}],"version-history":[{"count":3,"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/posts\/58\/revisions"}],"predecessor-version":[{"id":82,"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/posts\/58\/revisions\/82"}],"wp:attachment":[{"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/media?parent=58"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/categories?post=58"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/www.sugata.in\/index.php\/wp-json\/wp\/v2\/tags?post=58"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}