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The January sentiment effect in the U.S. stock market

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  • Chen, Zhongdong
  • Daves, Phillip R.

Abstract

We document the January sentiment effect in the U.S. stock market over the 1978–2017 period where January sentiment of individual investors has a significant impact on their asset allocation decisions and therefore, stock market returns from February to December. This effect is not likely driven by the other January effect and it appears to concentrate on riskier stocks including smaller stocks, higher market-to-book ratio stocks, and stocks with worse firm performance.

Suggested Citation

  • Chen, Zhongdong & Daves, Phillip R., 2018. "The January sentiment effect in the U.S. stock market," International Review of Financial Analysis, Elsevier, vol. 59(C), pages 94-104.
    • Handle: RePEc:eee:finana:v:59:y:2018:i:c:p:94-104
    DOI: 10.1016/j.irfa.2018.07.008
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    2. Philip Hans Franses, 2020. "Correcting the January optimism effect," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 39(6), pages 927-933, September.
    3. Ahmed, Walid M.A., 2020. "Stock market reactions to domestic sentiment: Panel CS-ARDL evidence," Research in International Business and Finance, Elsevier, vol. 54(C).
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    More about this item

    Keywords

    January sentiment; Stock return anomalies;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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