The authors wish to thank Thomas Henker, Tom Smith, Eliza Wu, and Henry Yip, an anonymous referee and participants at the Australasian Banking and Finance conference for helpful comments, and SIRCA and the ASX for providing the data.
Retail investors exonerated: the case of the January effect
Article first published online: 4 OCT 2011
© 2011 The Authors. Accounting and Finance © 2011 AFAANZ
Accounting & Finance
Volume 52, Issue 4, pages 1083–1099, December 2012
How to Cite
Henker, J. and Paul, D. J. (2012), Retail investors exonerated: the case of the January effect. Accounting & Finance, 52: 1083–1099. doi: 10.1111/j.1467-629X.2011.00449.x
- Issue published online: 13 DEC 2012
- Article first published online: 4 OCT 2011
- Received 25 August 2011; accepted 11 September 2011 by Robert Faff (Editor).
- Behavioural finance;
- January effect;
- Market efficiency;
- Retail investors
We dispel the belief that the January effect is due to retail investor trading. Previous studies suggest that retail investors, affected by behavioural biases and disproportionally invested in small capitalization stocks, are the source of the January effect. Furthermore, the literature regards retail investor trading and the tax-loss selling hypothesis as essentially the same explanation. We separate tax implications and market capitalization to show that retail traders are not the cause of the January effect. Our study is an important direct test of whether retail trading causes market anomalies.