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The UK Stock Market Almanac 2016: Seasonality analysis and studies of market anomalies to give you an edge in the year ahead by Stephen Eckett

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The January Effect

In 1976 an academic paper1 found that equally weighted indices of all the stocks on the NYSE had significantly higher returns in January than in the other 11 months over the period 1904-1974. This indicated that small capitalisation stocks outperformed larger stocks in January. Over the following years many further papers were written confirming this finding. In 2006 a paper2 tested this effect (now called the January Effect) on data from 1802 and found it was consistent up to the present time.

Does the January Effect work for UK stocks?

The following chart shows the cumulative performance from 1995 to mid-2015 of four stock indices in just the month of January. The four indices are:

  1. FTSE 100
  2. FTSE 250
  3. FTSE SmallCap
  4. FTSE ...

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