SSRN-The January Barometer: Further Evidence by Lawrence Brown, Liyu Luo

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The January Barometer: Further Evidence

LAWRENCE D. BROWN
Georgia State University - School of Accountancy
LIYU LUO
Georgia State University - School of Accountancy

Journal of Investing, Vol. 15, No. 1, 2006

Abstract:
Many investment practitioners rely on the January barometer, which argues that: as goes January, so goes the rest of the year (i.e., the next 11 months). Hensel and Ziemba (1995) investigated the validity of the January barometer, concluding that it works well, especially when January is an up month. However, their research design lacks a benchmark so one cannot infer from their study if January is special vis-a-vis other calendar months. We benchmark the January barometer against other calendar month barometers by examining returns in the 11 calendar months subsequent to each of the12 calendar months. In contrast to Hensel and Ziemba (1995), we show that the January barometer is an excellent bearish indicator when January is a down month, but it is a poor bullish indicator when January is an up month. Our results suggest that investors should treat a down January as a signal to stay out of the market, but that they should not treat an up January as a buy signal for the next 11 months.

Keywords: January barometer, signs of calendar month returns, predicting future returns

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Suggested Citation

Brown, Lawrence D. and Luo, Liyu, "The January Barometer: Further Evidence" . Journal of Investing, Vol. 15, No. 1, 2006 Available at SSRN: http://ssrn.com/abstract=593121

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Contact Information for LIYU LUO (Contact Author) Email address for LIYU LUO Georgia State University - School of Accountancy P.O. Box 4050 Atlanta , GA 30302-4050 United States
Contact Information for LAWRENCE D. BROWN Email address for LAWRENCE D. BROWN Georgia State University - School of Accountancy P.O. Box 4050 Room 504 Atlanta , GA 30302-4050 United States 404-413-7205 (Phone) 404-413-7203 (Fax)

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