The Scrutinized-Firm Effect, Portfolio Rebalancing, Stock Return Seasonality, and the Pervasiveness of the January Effect in Canada

27 Pages Posted: 8 Jul 2015

See all articles by George Athanassakos

George Athanassakos

University of Western Ontario - Finance-Economics Area Group

Date Written: July 7, 2015

Abstract

This article examines whether seasonality is present in the excess returns of low risk Canadian firms in safe industries for a sample of firms that are highly scrutinized and visible and uses such tests as the foundation to empirically testcompeting explanations of stock market seasonality, namely, the tax-loss selling hypothesis and the gamesmanship hypothesis. The tests cover the period 1980 to 1998. For a sample of highly scrutinized and visible firms strong seasonality in excess returns is reported. However, the firms in our sample have unusually low excess returns in January and returns adjust upwards over the remainder of the year. The results hold even after we control for various risk differences among the stocks of our sample. Further, this article’s findings imply that the January effect is not as pervasive across risk classes and industry sectors as earlier studies using aggregate data have shown it to be. The disaggregated data of this study provide evidence in support of the gamesmanship hypothesis, but not the tax-loss selling hypothesis. Whenever a January effect is observed, the last quarter of the year tends to be weak for those companies in our sample that experienced a strong January. The opposite is true when a January effect is not evident, as the gamesmanship hypothesis would predict.

Keywords: firm visibility; gamesmanship hypothesis; January effect; portfolio rebalancing

JEL Classification: G14

Suggested Citation

Athanassakos, George, The Scrutinized-Firm Effect, Portfolio Rebalancing, Stock Return Seasonality, and the Pervasiveness of the January Effect in Canada (July 7, 2015). Multinational Finance Journal, Vol. 6, No. 1, p. 1-27, 2002, Available at SSRN: https://ssrn.com/abstract=2627613

George Athanassakos (Contact Author)

University of Western Ontario - Finance-Economics Area Group ( email )

London, Ontario N6A 5B8
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
64
Abstract Views
641
Rank
657,013
PlumX Metrics