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.
|Title of host publication||Proceedings of the 2011 Financial Management Association Meeting|
|Place of Publication||Florida, USA|
|Publisher||Financial Management Association|
|Number of pages||37|
|Publication status||Published - 2011|
|Event||Financial Management Association 2011 Annual Meeting - Denver, Colorado, United States|
Duration: 20 Oct 2011 → 22 Oct 2011
|Conference||Financial Management Association 2011 Annual Meeting|
|Period||20/10/11 → 22/10/11|
Paul, D. J., & Henker, J. (2011). Does trading of retail investors cause the January effect? In J. Kose (Ed.), Proceedings of the 2011 Financial Management Association Meeting (pp. 1-37). Florida, USA: Financial Management Association .