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Central European Management Journal

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Year 2018 
Volume 26 
Issue 1

Impact of the January Effect on Return Rates in the Markets of the 2004 EU Enlargement

Błażej Podgórski

2018 26 (1) Central European Management Journal

DOI 10.7206/jmba.ce.2450-7814.218

Article contents

Abstract

Purpose: The article presents the results of a study conducted for the January effect. This anomaly is best recognized in the capital markets. In this case, we fnd explanation of its appearance based on both fundamental analysis and heuristics used by investors. The research focuses on the markets of the European Union enlargement countries of 2004. There are three hypotheses stated in the article: Hypothesis 1: The January Effect occurs in the analyzed markets. Hypothesis 2: The January Effect weakens over time. Hypothesis 3: The January Effect weakens with the development of a market.

Methodology: Three methods verifed the hypotheses: tests of differences, average and median rate of return, and dynamic models paneled with the estimation of parameters and the generalized method of moments.

Findings: The January Effect exists in the analyzed markets. The anomaly weakens over time but, after accession to the European Union, January return rates increase signifcantly.

Limitation: The defnite verifcation was diffcult due to the available methods and data. Further research in this feld is, therefore, needed.

Originality: The originality of the paper stems from the construction of the sample – new evidence from post-communist countries – which became the European Union members in 2004. The next important issue is the period of twenty years after the economic transformation – ten before and ten after the enlargement of the EU.

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  39. Barry, C.B. and Brown, S.J. (1985). Differential Information and Security Market Equilibrium. The Journal of Financial and Quantitative Analysis, 20(4), https://doi.org/10.2307/2330758 [Google Scholar]
  40. Bhardwaj, R.K. and Brooks L.D. (1992). The January Anomaly : Effects of Low Share Price, Transaction Costs, and Bid–Ask Bias. The Journal of Finance, 47(2), https://doi.org/10.1111/j.1540-6261.1992.tb04401.x [Google Scholar]
  41. Bonin, J.M. and Moses, E.A. (1974). Seasonal Variations in Prices of Individual Dow Jones Industrial. The Journal of Financial and Quantitative Analysis, 9(6), https://doi.org/10.2307/2329730 [Google Scholar]
  42. Brauer, G.A. and Chang, E.C. (1990). Return Seasonality in Stocks and Their Underlying Assets: Tax–Loss Selling versus Information Explanations. Review of Financial Studies, 3(2), https://doi.org/10.1093/rfs/3.2.255 [Google Scholar]
  43. Brown, P., Keim, D.B., Kleidon A.W., Marsh T.A. (1983). Stock Return Seasonalities Tax–Loss Selling Hypothesis. Journal of Financial Economics, 12, https://doi.org/10.1016/0304-405X(83)90030-2 [Google Scholar]
  44. Cox, R. and Johnson, K. (1998). The January Effect is not Driven by Tax Loss Selling. Journal of Investing, 7(4), https://doi.org/10.3905/joi.1998.408480 [Google Scholar]
  45. Cox, R. and Johnson, K. (1998). The January Effect is not Driven by Tax Loss Selling. Journal of Investing, 7(4), https://doi.org/10.3905/joi.1998.408480 [Google Scholar]
  46. Diaconasu, D.E., Mehdian, S. and Stoica, O. (2012). An Examination of the Calendar Anomalies in the Romanian Stock Market. Procedia Economics and Finance, 3: 817–822, https://doi.org/10.1016/S2212-5671(12)00235-3 [Google Scholar]
  47. Dragotă, V. and Ţilică, E.V. (2014). Market effciency of the Post-Communist East European stock markets. Central European Journal of Operations Research, 22(2): 307–337, https://doi.org/10.1007/s10100-013-0315-6 [Google Scholar]
  48. Forrest, A.B. (1927). Individual Cycles in Stock Prices. The Journal of Political Economy, 35(6). [Google Scholar]
  49. Fountas, S. and Segredakis, K.N. (2002). Emerging Stock Markets Return Seasonalities: the January Effect and the Tax–Loss Selling Hypothesis. Applied Financial Economics, 12(4), https://doi.org/10.1080/09603100010000839 [Google Scholar]
  50. Gu, A.Y. (2003a). The Declining January Effect: Evidences from the U. S. Equity Markets. The Quarterly Review of Economics and Finance, 43(2), https://doi.org/10.1016/S1062-9769(02)00160-6 [Google Scholar]
  51. Gu, A.Y. (2003b). The Declining January Effect: Experience of Five G7 Countries. International Journal of Finance, 15(1). [Google Scholar]
  52. Gultekin, B.N. and Gultekin, M.N. (1983). Stock Market Seasonality International Evidence. Journal of Financial Economics, 12(4), https://doi.org/10.1016/0304-405X(83)90044-2 [Google Scholar]
  53. Jackowicz, K., Kozłowski, Ł. and Podgórski, B. (2017). The Distant Echo of Brexit: Did Exporters Suffer the Most?, Finance Research Letters, 21, https://doi.org/10.1016/j.frl.2016.11.012 [Google Scholar]
  54. Kato, K. and Schallheim, J.S. (1985). Seasonal and Size Anomalies in the Japanese Stock Market. The Journal of Financial and Quantitative Analysis, 20(2), https://doi.org/10.2307/2330958 [Google Scholar]
  55. Keim, D.B. (1983). Size-Related Anomalies and Stock Return Seasonality. Journal of Financial Economics, 12, https://doi.org/10.1016/0304-405X(83)90025-9 [Google Scholar]
  56. Kramer, Ch. (1994). Macroeconomic Seasonality and the January Effect. The Journal of Finance, 49(5), https://doi.org/10.2307/2329275 [Google Scholar]
  57. Kuznets, S. (1933). Seasonal Variations in Industry and Trade. National Bureau of Economic Research. [Google Scholar]
  58. Lakonishok, J., Shleifer, A., Thaler, R. and Vishny, R. (1991). Window Dressing by Pension Fund Managers. American Economic Association, 81(2), https://doi.org/10.3386/w3617 [Google Scholar]
  59. Lakonishok J., Shleifer A. and Vishny R. (1994). Contrarian Investment, Extrapolation, and Risk. The Journal of Finance, 49(5). https://doi.org/10.1111/j.1540-6261.1994.tb04772.x [Google Scholar]
  60. Martínez-Murcia, F.J., Górriz J.M., Ramírez J., Puntonet C.G. and Salas-González, D. (2012). Computer Aided Diagnosis tool for Alzheimer’s Disease based on Mann–Whitney–Wilcoxon U–Test. Expert Systems with Applications, 39(10): 9676–9685. [Google Scholar]
  61. Moller, N. and Zilca, S. (2008). The evolution of the January effect. Journal of Banking & Finance, 32(3), https://doi.org/10.1016/j.jbankfn.2007.06.009 [Google Scholar]
  62. Ogden, J.P. (1990). Turn of Month Evaluations of Liquid Profts and Stock Returns: A common Explanation for the Monthly and January Effects. Journal of Finance, 45(4), https://doi.org/10.1111/j.1540-6261.1990.tb02435.x [Google Scholar]
  63. Peng, L. and Tong, T. (2011). A note on a two sample T test with one variance unknown. Statistical Methodology, 8(6). [Google Scholar]
  64. Podgorski, B. (2010). Efektywność informacyjna GPW w Warszawie – przegląd badań. MBA, 4(105) [Google Scholar]
  65. Reinganum M.R. (1983). The Anomalous Stock Market Behavior of Small Firms in January. Journal of Financial Economics, 12(1), https://doi.org/10.1016/0304-405X(83)90029-6 [Google Scholar]
  66. Rozeff, S.M. and Kinney, W.R. Jr. (1976). Capital Market Seasonality: The Case of Stock Returns. Journal of Financial Economics, 3(4). [Google Scholar]
  67. Rozeff, S.M. and Kinney, W.R. Jr. (1976). Capital Market Seasonality: The Case of Stock Returns. Journal of Financial Economics, 3(4). [Google Scholar]
  68. Ruxton, G.D. and Beauchamp, G. (2008). Some Suggestion about Appropriate Use of the Kruskal– –Wallis test. Animal Behaviour, 76, https://doi.org/10.1016/j.anbehav.2008.04.011 [Google Scholar]
  69. Schechtman, E. and Sherman, M. (2007). The two sample t–test with a known ratio of variances. Statistical Methodology, 4(4), https://doi.org/10.1016/j.stamet.2007.03.001 [Google Scholar]
  70. Tonchev, D. and Kim, T.H. (2004). Calendar Effects in Eastern European Financial Markets: Evidence from The Czech Republic, Slovakia and Slovenia. Applied Financial Economics, 14(14): 1035–1043, https://doi.org/10.1080/0960310042000264003 [Google Scholar]
  71. Wachtel, S.B. (1942). Certain Observations on Seosonal Movements in Stock Prices. The Journal of Bussiness of the University of Chicago, 15(2). [Google Scholar]
  72. Winkler-Drews, T. (2009). Fuzje giełd – giełda fuzji. MBA, 3: 3–13. [Google Scholar]

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APA style

Podgórski, Błażej (2018). Podgórski, B.. (2018). Impact of the January Effect on Return Rates in the Markets of the 2004 EU Enlargement. Central European Management Journal, 26(1), 27-48. https://doi.org/10.7206/jmba.ce.2450-7814.218 (Original work published 2018)

MLA style

Podgórski, Błażej. Podgórski, B.. “Impact Of The January Effect On Return Rates In The Markets Of The 2004 Eu Enlargement”. 2018. Central European Management Journal, vol. 26, no. 1, 2018, pp. 27-48.

Chicago style

Podgórski, Błażej. Podgórski, Błażej . “Impact Of The January Effect On Return Rates In The Markets Of The 2004 Eu Enlargement”. Central European Management Journal, Central European Management Journal, 26, no. 1 (2018): 27-48. doi:10.7206/jmba.ce.2450-7814.218.

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