How Predictive Is the Month of January?

January is just around the corner, and it isn't too early to start thinking about whether people should pay any particular attention to it. The author not talking about the well-known "January effect" where small cap stocks perform exceptionally well in January compared to the stock m...

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Bibliographic Details
Published in:Journal of Financial Planning 2013-11, Vol.26 (11), p.36
Main Author: Riepe, Mark W
Format: Article
Language:English
Subjects:
Hypotheses
Portfolio performance
Rates of return
Securities markets
Small cap investments
Online Access:Get full text
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Summary:January is just around the corner, and it isn't too early to start thinking about whether people should pay any particular attention to it. The author not talking about the well-known "January effect" where small cap stocks perform exceptionally well in January compared to the stock market as a whole. He's speaking of a different January phenomenon where the performance of the stock market in the month of January is correlated with the performance of the market during the rest of the calendar year. There are two versions of this hypothesis. The narrower form of the hypothesis states that when the US stock market in January is positive, the rest of the year will be positive. When the market rises in January, the market's total return over the subsequent February to December period is positive 80% of the time (44 out of 55). The narrower version has a remarkable track record on its side.
ISSN:1040-3981