Taking Stock of January Effect
The January effect is a phenomena in stock markets where the month of January seems to produce better returns on average than other months. We last examined this in 2007. However average returns can still include outliers in individual years. For example, the very next year saw January 2008 produce minus 11.3% in the early stages of the Global Financial Crisis. As we said in our 2007 article “..don’t go relying on it every year!”.
We have examined the full distribution of our Australian stock market price index data back to 1875 and now up to including January 2013. The results show the average for months of January is 1.6% while for all other months the average is 0.4%. January 2013 was up 5.1%. Outliers for all Januaries are a maximum 14.2% and a minimum of minus 12.5% (for January 1876 which was just a bit worse than 2008). The range for other months is a maximum 24.7% and a minimum minus 42.4%.
Posted Friday, 1 February 2013
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