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The 'other' January effect and the presidential election cycle

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  • Ray Sturm

Abstract

The 'other' January effect posits that when January's stock returns are positive (negative), the remaining 11 months of the year tend to be positive (negative) as well. While no explanation is currently offered, this departure from market efficiency carries important implications for the portfolio management decision. Other research has shown that stock returns tend to be higher during the second half of the president's term than during the first half as a result of variations in fiscal policy across time. When the 'other' January effect is examined in the presence of the presidential election cycle, it seems clear that January holds greater predictive power during certain years of the president's term in office. Therefore, in portfolio management decisions, investors should not view either in isolation, but consider both together.

Suggested Citation

  • Ray Sturm, 2009. "The 'other' January effect and the presidential election cycle," Applied Financial Economics, Taylor & Francis Journals, vol. 19(17), pages 1355-1363.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:17:p:1355-1363
    DOI: 10.1080/09603100802599589
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    Cited by:

    1. Shaikh, Imlak, 2017. "The 2016 U.S. presidential election and the Stock, FX and VIX markets," The North American Journal of Economics and Finance, Elsevier, vol. 42(C), pages 546-563.
    2. Ray Sturm, 2013. "Economic policy and the presidential election cycle in stock returns," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 37(2), pages 200-215, April.
    3. Kumar, Satish, 2016. "Revisiting calendar anomalies: Three decades of multicurrency evidence," Journal of Economics and Business, Elsevier, vol. 86(C), pages 16-32.
    4. Ray R. Sturm, 2016. "Is There a Presidential Election Cycle in Firm Financials?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-18, June.

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