Quick Definition

The January Effect is a seasonal increase in stock prices during the month of January, often attributed to the increase in buying which follows the sell-off for tax purposes at the end of the year.

Examples

• 1Investors may notice a significant uptick in small-cap stocks every January, which can be attributed to the January Effect.
• 2A portfolio manager might increase holdings in December in anticipation of the January Effect to capitalize on potential gains.
• 3Financial analysts often examine historical data to predict the strength of the January Effect in the upcoming year.
• 4Retail investors might choose January to enter the market, hoping to benefit from the generally positive market trends observed during this period.

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