The January Effect

This paper examines one of the most profound and best-known of all the psychological phenomena in the stock market: The January effect. It discusses this trend, asking if it is a real phenomena or simply a mass marketing campaign. It provides an extensive look at the psyche of the stock market junkie. Many graphs are displayed.

From the paper:

“Nothing is a sure bet in the world of investing in stocks ? maybe even not death and certainly not taxes, as revelations about Enron have recently reminded us. And it is precisely this high level of insecurity that prompts people ? even against all possible rational reasons ? to look for patterns in the stock market that will help them invest, just as a person desperate to have a winning day at the track will bet on every fifth horse, or every horse wearing green and white, or every jockey whose name begins with K.

One essential difference between horse-racing and the stock market, however, is that the actions of those ?betting? ? i.e. buying and selling shares ? can have a real effect on the end result.”