Professional Investor Re-entry and the January Effect

ADVANCES IN FINANCIAL ECONOMICS, Vol. 2

Posted: 14 May 1998  

Charles J. Cuny

affiliation not provided to SSRN

Mark Fedenia

University of Wisconsin - Madison - Department of Finance, Investment and Banking

Robert A. Haugen

Haugen Custom Financial Systems

Abstract

A re-entry theory for abnormal behavior of financial markets in January is derived and tested. The model predicts that, by optimally shifting portfolios to mimic a benchmark, successful investment managers lock in superior performance, while unsuccessful investment managers lock out possible termination. Price pressure, ensuing from re-entry, occurs at the turn of the year, when managers uniformly prefer to reverse benchmark matching strategies. Analysis of professionally managed portfolios over the period 1969-1989 provides mixed support for the theory. At year-end, extreme performers exhibit some movement toward the S&P 500 index. This pattern reverses shortly after the turn of the year.

JEL Classification: G10

Suggested Citation

Cuny, Charles J. and Fedenia, Mark and Haugen , Robert A., Professional Investor Re-entry and the January Effect. ADVANCES IN FINANCIAL ECONOMICS, Vol. 2. Available at SSRN: https://ssrn.com/abstract=7579

Charles John Cuny

affiliation not provided to SSRN

Mark A. Fedenia (Contact Author)

University of Wisconsin - Madison - Department of Finance, Investment and Banking ( email )

975 University Avenue
Madison, WI 53706
United States
608-263-4502 (Phone)
608-265-3495 (Fax)

Robert A. Haugen

Haugen Custom Financial Systems ( email )

128 W. 14th Street
Suite 201
Durango, CO 81301
United States
(970) 259-9512 (Phone)

HOME PAGE: http://www.haugensystems.com

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