The January effect: a global perspective

The January Effect is one of the most commonly studied anomalies in finance. While largely still considered a mystery, the January effect explanation that has garnered the most attention and validity is the tax-loss selling hypothesis. This paper begins with a review of the immense body of literature surrounding the January effect. Then I test, across 16 countries, whether or not there is a significant positive difference in the January returns (or whichever month is the beginning of the tax-year) from the remaining eleven months of the year. The January seasonal is found to be significant in seven of the 16 countries, while a surprising September seasonal, inadvertently discovered and tested, is significant in 13 of 16 countries. As is commonly the result when studying this anomaly, further study is warranted to discover a powerful explanation for the January effect.