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Personal Income Taxes and the January Effect: Small Firm Stock Returns Before the War Revenue Act of 1917: A Note



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    • Graduate School of Business, University of Chicago. I have received useful suggestions and comments concerning this paper from Steve Buser, Nai-fu Chen, George Constantinides, Eugene Fama, Bruce Grundy, Robert Holthausen, Dick Kazarian, Don Keim, Robert Korajczyk, Richard Leftwich, and Wayne Mikkelson. I am also grateful for the help of Sandra Anderson, Diana Couroussis, Michael Laubsted, and Bill Peluchiwski who gathered the data used in earlier drafts of this paper. Errors are my own.


This paper tests the tax explanation of the January effect by examining small firm stock returns before the War Revenue Act of 1917. No evidence of a turn-of-the-year effect is found. This paper also extends previous authors' work on the subject to 1918–29. A January effect is found during that period.

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