The Other January Effect
Michael J. Cooper
University of Utah - David Eccles School of Business
John J. McConnell
Alexei V. Ovtchinnikov
HEC Paris - Finance Department
September 19, 2005
AFA 2006 Boston Meetings Paper
"Streetlore" has touted the market return in January as a predictor of market returns for the remainder of the year since at least 1973. We systematically examine the predictive power of January returns over the period 1940-2003 and find that January returns have predictive power for market returns over the next 11 months of the year. The effect persists after controlling for macroeconomic/business cycle variables that have been shown to predict stock returns, the Presidential Cycle in returns, and investor sentiment and persists among both large and small capitalization stocks and among both value and glamour stocks. Additionally, we find that January has predictive power for two of the three premiums in the Fama-French (1993) three-factor model of asset pricing.
Number of Pages in PDF File: 46
Date posted: February 7, 2005
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