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The January effect can be explained by the impact of taxes and various metrics used to gauge performance of money managers. Large cap and small cap stocks react
by fredophile 12y ago
The January effect can be explained by the impact of taxes and various metrics used to gauge performance of money managers. Large cap and small cap stocks react differently to the January effect. There is a correlation between January and performance but no causation. If these other factors changed the January effect could disappear or move to another time of year.
- panarky 12y agoA truly efficient market would anticipate the effect of taxes and window dressing by money managers, and arbitrage away any price differentials.
- fredophile 12y agoThere are limits to arbitrage. Little players can't really move prices and big players are the ones causing the effect. I don't believe the market is efficient, especially short term. I believe that in the long term it is efficient-ish. Value strategies try to take advantage of mispricing from short term thinking but stocks can stay mispriced for a very long time.