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Investment: An A-Z Guide by Philip Ryland

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J

January effect

January is different from other months in the stockmarket. A study of market returns in 16 countries found that in 15 of them January produced above-average returns and that this effect is strongest in the UK and the United States. For example, a study of US STOCK returns for 1904–74 showed that the average monthly return was 0.5%, but for January it was 3.5%. Furthermore, in the United States the feature is concentrated on the stock of small corporations. The DOW JONES INDUSTRIAL AVERAGE of 30 leading corporations showed no January effect. This could be for tax reasons, because stocks are sold towards the end of the tax year in December, then bought back at the start of the new tax year. As the UK’s tax year runs till ...

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