When the New Year’s rockets are fired, it’s also common to bounce back in something completely different. For the risk-averse investor, there may be more to be gained by positioning themselves as the stock market losers of the year at the start of the new year.
The January effect was a remarkably reliable trading strategy. In theory, known market anomalies will arbitrage over time, but that has not been the case with the January impact in Norway, at least not yet, says DNB Markets chief strategist Paul Harper.
According to him, the tax implications are the main reason why some damaged stocks performed well right after the end of the year.
Investors who have experienced losses in a share that has fallen sharply throughout the year want to realize the loss in order to receive a tax deduction. The theory is that the stock is oversold towards the end of the year, and then rises at the start of the new year.
brokerage house DNB Markets arrived on December 15th With ten damaged New Year’s rockets of 2020. The stock could be said to be even more profound. In just two weeks, the portfolio rose by 12 percent, while the main index on the Oslo Stock Exchange rose by 4.4 percent in the same period.
The January effect was first documented by Sidney Wachtels in an article titled “Certain Notes on the Seasonal Movement of Stock Prices,” which was published in the Journal of Business in 1942.
DNB Markets models show that the optimum period in terms of returns is from mid-December to the fifth trading day in January.
“Usually, I’ve already received some returns, so the odds are going to be somewhat worse, but there may still be returns if the historical seasonal pattern continues,” Harper says.
The influence of Santa Claus on the stock market
– which – which is being Santa’s impact on stock markets, says Director of Strategy Thomas Itzen at SEB, and quickly adds:
And the effect will be even stronger if you include the first days in January.
Eitzen summarizes the last five trading days of the year for more than 20 stock markets. The conclusion is that the indicators rise significantly more these days than all the other five-day periods during the calendar year.
The strong stock markets in January have a fairly strong explanation for the rebalancing of all institutional investors in the world before the new year. In January, all the money in the stock market will be put back into circulation, Itzen says, and it had to be thought why the markets might also be higher at the end of December — contrary to the notion that this is a good time. . Capital is withdrawn from the markets before the New Year.
“Since everyone knows that there is a lot of liquidity to be pumped into the stock market in January, it is likely that a number of investors will start stealing in the Christmas period,” says the statistician, who stresses that the results are significant.
People believe in the effect of Santa Claus on the stock market and people believe in the effect of January.
Heavy weights pull the load
On the Oslo Stock Exchange, seven of the ten heaviest weight companies were lifted in the past week. All major indices have also generated a return of three to five percent in recent days, and Christmas 2021 will confirm Itzen’s statistical findings.
In his analysis of Christmas, he included all Christmas periods over the past 20-40 years, depending on the quality of the data in each market, and then calculated average and average returns for 24 stock exchanges around the world. “He tends to be good with gifts under the tree,” Eitzen summarizes.
– One would think that the effect was greater the closer we got to the head office at the North Pole, but it turns out that Santa Claus must have had warehouses in several places in the world. Interestingly, the size of Christmas gifts does not correlate with how close you are to the North Pole, or your drawback, or the indicators of kindness, which are the UN living conditions indicator. This is a little disappointing, Eitzen writes in an update.
The strongest stock markets are in Brazil, Argentina, Norway, Greece and Poland at Christmas, according to Eitzen, possibly due to the fact that these markets are relatively volatile on normal trading days as well. Stock exchanges in Poland, Portugal, Italy and Japan have the strongest Christmas markets, if you compare the effect of Christmas with other days of the year.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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