Does trading of retail investors cause the January effect?

Debapriya Jojo Paul, Julia Henker

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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.
Original languageEnglish
Title of host publicationProceedings of the 2011 Financial Management Association Meeting
EditorsJ Kose
Place of PublicationFlorida, USA
PublisherFinancial Management Association
Pages1-37
Number of pages37
Publication statusPublished - 2011
EventFinancial Management Association 2011 Annual Meeting - Denver, Colorado, United States
Duration: 20 Oct 201122 Oct 2011
http://www.fma.org/

Conference

ConferenceFinancial Management Association 2011 Annual Meeting
CountryUnited States
CityColorado
Period20/10/1122/10/11
Internet address

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    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). Financial Management Association .