ADVANCES IN FINANCIAL ECONOMICS, Vol. 2
Posted: 14 May 1998
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: 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