The january effect in financial markets: A review

Abstract

The work consists of doing a literature review about “The January effect” or “Turn of the year”. Nowadays January effect is considered one of the most important stock exchange's anomalies, we focus in its historical evolution and its presence in different countries, considering some of these such as the relevant. The different causes which explain the January effect have a fundamental role in this work. We make an exhaustive analysis about the possible causes of the January effect, being Tax loss selling hypothesis and Window-Dressing the most important among all which exists. There were few critiques advocated against the January effect, the supporters show empirical studies demonstrating the January effect, while the opponents do the opposite claiming theories. In this work we come up with a general balance of the theoretical possibility to reason the truthfulness of the January effect in different studies. Once the research is done, we show that the majority of researchers verified and continue verifying the truthfulness of the January effect, despite they asociated differential causes for its existence. The January effect is only damaged deppending on the way to estimate and the sample perido calculated. However currently the January effect is an anomaly because continues happening, although due to the aknowleadge of it, it has been lossing power. During the cronollogy research it will be demostrated, that the January have lost power, however it continues happening around the world.