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A Simultaneous Test Of Competing Theories Regarding The January Effect

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  • James A. Ligon

Abstract

In a multivariate context, the January effect appears most significantly related to excess individual liquidity (i.e., high cash balances and low expected taxes), but multicollinearity may obscure the relation between other variables and the effect. In a univariate context, prior February–December returns and the standard deviation of prior‐year returns are most significantly related to the January effect. In both contexts, higher January volume and lower real interest rates are correlated with higher January returns. I find no evidence that window dressing by professional managers or macroeconomic seasonality (other than real interest rate seasonality) are significantly related to the January effect.

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  • James A. Ligon, 1997. "A Simultaneous Test Of Competing Theories Regarding The January Effect," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 20(1), pages 13-32, March.
    • Handle: RePEc:bla:jfnres:v:20:y:1997:i:1:p:13-32
    DOI: 10.1111/j.1475-6803.1997.tb00234.x
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    Cited by:

    1. Fatima Syed & Naimat U. Khan, 2017. "Islamic Calendar Anomalies: Evidence from Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(3), pages 104-122, September.
    2. Arbab Khalid Cheema & Wenjie Ding & Qingwei Wang, 2023. "The cross-section of January effect," Journal of Asset Management, Palgrave Macmillan, vol. 24(6), pages 513-530, October.
    3. Ken Johnston & Don Cox, 2002. "Market index returns, macroeconomic variables, and tax-loss selling," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 26(3), pages 297-308, September.
    4. Zhong, Angel & Chai, Daniel & Li, Bob & Chiah, Mardy, 2018. "Volume shocks and stock returns: An alternative test," Pacific-Basin Finance Journal, Elsevier, vol. 48(C), pages 1-16.
    5. Menyah, Kojo, 1999. "New evidence on the impact of size and taxation on the seasonality of UK equity returns," Review of Financial Economics, Elsevier, vol. 8(1), pages 11-24, June.
    6. Sadia Anjum, 2020. "Impact of market anomalies on stock exchange: a comparative study of KSE and PSX," Future Business Journal, Springer, vol. 6(1), pages 1-11, December.
    7. Jones, Travis L. & Ligon, James A., 2009. "The day of the week effect in IPO initial returns," The Quarterly Review of Economics and Finance, Elsevier, vol. 49(1), pages 110-127, February.
    8. Rajesh Elangovan & Francis Gnanasekar Irudayasamy & Satyanarayana Parayitam, 2022. "Month-of-the-Year Effect: Empirical Evidence from Indian Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(3), pages 449-476, September.
    9. Ken Johnston & Chris Paul, 2005. "Further evidence of the November effect," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 29(2), pages 280-288, June.
    10. Gu, Anthony Yanxiang, 2003. "The declining January effect: evidences from the U.S. equity markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(2), pages 395-404.
    11. Kojo Menyah, 1999. "New evidence on the impact of size and taxation on the seasonality of UK equity returns," Review of Financial Economics, John Wiley & Sons, vol. 8(1), pages 11-24.
    12. Lynch, Andrew & Puckett, Andy & Yan, Xuemin (Sterling), 2014. "Institutions and the turn-of-the-year effect: Evidence from actual institutional trades," Journal of Banking & Finance, Elsevier, vol. 49(C), pages 56-68.
    13. Rakesh Bali, 2003. "Seasonality in ex dividend day returns," Applied Economics Letters, Taylor & Francis Journals, vol. 10(14), pages 929-932.
    14. Harshita & Shveta Singh & Surendra S. Yadav, 2019. "Unique Calendar Effects in the Indian Stock Market: Evidence and Explanations," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(1_suppl), pages 35-58, April.
    15. Shikta Singh & Chandrabhanu Das, 2020. "Calendar Anomalies in the Banking and it Index: The Indian Experience," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(4), pages 439-448, April.
    16. Mark J. Kamstra & Lisa A. Kramer & Maurice D. Levi, 2003. "Winter Blues: A SAD Stock Market Cycle," American Economic Review, American Economic Association, vol. 93(1), pages 324-343, March.
    17. William Compton & Robert Kunkel, 2000. "Tax-free trading on calendar stock and bond market patterns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 24(1), pages 64-76, March.
    18. Xudong Fu & James A. Ligon, 2010. "Exercises of Executive Stock Options on the Vesting Date," Financial Management, Financial Management Association International, vol. 39(3), pages 1097-1126, September.
    19. Abdul Rashid & Saba Kausar, 2019. "Testing the Monthly Calendar Anomaly of Stock Returns in Pakistan: A Stochastic Dominance Approach," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 58(1), pages 83-104.

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