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Testing the Presence of the January Effect in Developed Economies

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  • Nisar, Sabahat
  • Asif, Rabia
  • Ali, Amjad

Abstract

The purpose of the current research is to test the efficient market hypothesis keeping in view the January effect for developed economies, namely the United Kingdom. By incorporating daily return data from 2009 till 2020, the robust econometric modeling discloses the presence of anomalous patterns in UK stock returns around the year. Key results confirm the presence of seasonal effects predominantly the January effect for the sample country. Stronger evidence (in terms of statistical significance) for April, July, August, September, and November are obtained. The obtained results also propose confirmation in favor of the tax-loss selling hypothesis. Further, the presence of the January effect anomaly perceived in this research was unlikely to provide lucrative arbitrage because abnormal returns were not found to be large enough to offset the associated transactions costs.

Suggested Citation

  • Nisar, Sabahat & Asif, Rabia & Ali, Amjad, 2021. "Testing the Presence of the January Effect in Developed Economies," MPRA Paper 112548, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:112548
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    More about this item

    Keywords

    Efficient Markets; Tax Selling Hypothesis; January Effects; Stock Returns;
    All these keywords.

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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