Title

Does trading of retail investors cause the January effect?

Date of this Version

10-19-2011

Document Type

Conference Paper

Publication Details

Citation only.

Paul, D. J., & Henker, J. (2011). Does trading of retail investors cause the January effect? Paper presented at the 2011 Financial Management Association (FMA) Annual Meeting, Denver, Colorado, United States.

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2011 HERDC submission. FoR code: 150201

© Copyright Debapriay Jojo Paul & Julia Henker, 2011

Abstract

We dispel the belief that the January effect, anomalous returns to small-capitalization stocks in the month of January, is a retail investor trading phenomenon. We use a market with a July-June tax year, Australia, to separate potential tax loss selling from other anomalous returns. Our results indicate that a January effect does persist in the Australian market, but it is not a result of retail investor trading. Furthermore, retail investor trading does not have a convincingly significant effect independent of market capitalization. Our study is important as a direct test of the assumption that retail trading causes market anomalies.

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This document has been peer reviewed.