Retail Investors Exonerated: The Case of the January Effect

17 Pages Posted: 14 Dec 2012

See all articles by Julia Henker

Julia Henker

Bond University

Jojo Paul

University of New South Wales (UNSW)

Date Written: December 2012

Abstract

We dispel the belief that the January effect is due to retail investor trading. Previous studies suggest that retail investors, affected by behavioural biases and disproportionally invested in small capitalization stocks, are the source of the January effect. Furthermore, the literature regards retail investor trading and the tax‚Äźloss selling hypothesis as essentially the same explanation. We separate tax implications and market capitalization to show that retail traders are not the cause of the January effect. Our study is an important direct test of whether retail trading causes market anomalies.

Keywords: Anomaly, Behavioural finance, January effect, Market efficiency, Retail investors

JEL Classification: G14

Suggested Citation

Henker, Julia and Paul, Debapriya Jojo, Retail Investors Exonerated: The Case of the January Effect (December 2012). Accounting & Finance, Vol. 52, Issue 4, pp. 1083-1099, 2012. Available at SSRN: https://ssrn.com/abstract=2189334 or http://dx.doi.org/10.1111/j.1467-629X.2011.00449.x

Julia Henker (Contact Author)

Bond University ( email )

Gold Coast, QLD 4229
Australia

Debapriya Jojo Paul

University of New South Wales (UNSW) ( email )

Kensington
High St
Sydney, NSW 2052
Australia

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