ALL THINGS CONSIDERED, TAXES DRIVE THE JANUARY EFFECT

Authors:
  • HCHonghui Chen
    Honghui Chen
  • VSVijay Singal
    Vijay Singal
Publisher website
Google Scholar
Abstract
The multitude of explanations for the January effect leaves the reader confused about its primary cause(s): is it tax‐loss selling, window dressing, information, bid‐ask bounce, or a combination of these causes? The confusion arises, in part, because evidence has generally been presented in support of a particular hypothesis though the same evidence may be consistent with another hypothesis. Furthermore, prior work does not adequately control for the bid‐ask bounce. In this article we try to disentangle different explanations of the January effect and identify its primary cause. We find that tax‐related selling is the most important cause, overshadowing other explanations.
Keywords

This publication has 24 references indexed in Scilit: