Abstract

http://ssrn.com/abstract=1166149
 
 

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The Persistence of the Small Firm/January Effect: Is it Consistent With Investors' Learning and Arbitrage Efforts?


Kathryn E. Easterday


Miami University Farmer School of Business

Pradyot K. Sen


University of Washington Bothell

Jens Stephan


University of Cincinnati - Department of Accounting

June 2008

Quarterly Review of Economics and Finance, Forthcoming

Abstract:     
Using improved methodology and an expanded research design, we examine whether the small firm/January effect (Keim 1983) is declining over time due to market efficiency. First, we find that January returns are smaller after 1963-1979, but have simply reverted to levels that existed before that time. Second, we show that the January effect is not limited to mature markets but also appears in firms trading on the relatively new NASDAQ exchange in the 1970s. Third, trading volume for small firms in December and January is not different from other months, implying that traders are not actively arbitraging the anomaly. Together, our results suggest that this anomaly continues to defy rational explanation in an efficient market.

Number of Pages in PDF File: 47

Keywords: January effect, market efficiency, arbitrage

JEL Classification: G12

Accepted Paper Series


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Date posted: July 22, 2008  

Suggested Citation

Easterday, Kathryn E. and Sen, Pradyot K. and Stephan, Jens, The Persistence of the Small Firm/January Effect: Is it Consistent With Investors' Learning and Arbitrage Efforts? (June 2008). Quarterly Review of Economics and Finance, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1166149

Contact Information

Kathryn E. Easterday (Contact Author)
Miami University Farmer School of Business ( email )
800 E. High Street
Oxford, OH 45056
United States
513-529-6217 (Phone)
Pradyot K. Sen
University of Washington Bothell ( email )
UW 1-132
Bothell, WA 98011-8246
United States
425-352-5432 (Phone)
Jens Stephan
University of Cincinnati - Department of Accounting ( email )
Cincinnati, OH 45221-0211
United States
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