The January Effect is a calendar-related anomaly in the financial market where financial security prices increase in the month of January. This creates an opportunity for investors to buy stock for lower prices before January and sell them after their value increases.
Therefore, the main characteristics of the January Effect are an increase in buying securities before the end of the year for a lower price, and selling them in January to generate profit from the price differences.
This type of pattern in price behavior on the financial market supports the fact that financial markets are not fully efficient.
The January Effect was first observed in the early 1980s by Donald Keim who, at the time, was a graduate student at the University of Chicago. It is the observed phenomenon that since 1925, small stocks have outperformed the broader market in the month of January, with most of the disparity occurring before the middle of the month.
The most common theory explaining this phenomenon is that individual investors, who are income tax-sensitive and who disproportionately hold small stocks, sell stocks for tax reasons at year end (such as to claim a capital loss) and reinvest after the first of the year. The January effect does not always materialize; for example, small stocks underperformed large stocks in January 1982, 1987, 1989 and 1990.
Will the January Effect come to our country??? Just wait & see... I don't think that the January Effect will come in this week. But who knows that it come suddenly, but keep in mind that we're in a flash crash & now I'm 80% in cash to catch a good opportunity that might come.
Reference: Wikipedia.com
Happy Investing^^
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