Faculty of Finance, The Ohio State University. I thank Warren Bailey, James Bodurtha, Stephen Buser, Nai-fu Chen, George Constantinides, Rene Stulz, and especially the referee for helpful comments.
Can Tax-Loss Selling Explain the January Seasonal in Stock Returns?
Article first published online: 30 APR 2012
1986 The American Finance Association
The Journal of Finance
Volume 41, Issue 5, pages 1115–1128, December 1986
How to Cite
CHAN, K. C. (1986), Can Tax-Loss Selling Explain the January Seasonal in Stock Returns?. The Journal of Finance, 41: 1115–1128. doi: 10.1111/j.1540-6261.1986.tb02534.x
- Issue published online: 30 APR 2012
- Article first published online: 30 APR 2012
This paper analyzes the tax-loss selling hypothesis as an explanation of the January seasonal in stock returns and argues that rational tax-loss selling implies little relation between the January seasonal and the long-term loss. Empirical results show that the January seasonal is as strongly related to the long-term loss as it is to the short-term loss. The evidence is inconsistent with a model that explains the January seasonal by optimal tax trading.