Is the January Effect Economically Exploitable? Evidence from Athens Stock Exchange

31 Pages Posted: 9 Dec 2002

See all articles by Theocharis Koutianoudis

Theocharis Koutianoudis

University of Manchester - Division of Accounting and Finance

Shiyun Wang

University of Sheffield - School of Management

Date Written: August 15, 2002

Abstract

This paper pioneers the study of the economic significance of the monthly seasonality in the emerging markets. Previous literature on the seasonal anomaly, mainly on big and developed markets, has often reported that the anomaly is insignificant after considering the transaction costs. Using real time data including transaction costs of the Athens Stock Exchange, we find very significant January strategy profits, thus casting doubt on the efficiency market hypothesis. This is good news for international portfolio investors. Further, we find that the pattern of January effect changes with the market direction. Specifically, the January effect disappears when the market experiences heavy depressing. This is reasonable as when the market is going down, investors may be reluctant to buy back the stocks they sold previously in December, as described by portfolio rebalancing or window-dressing hypothesis. The main implication of this new finding is that investors may need to consider the market direction when constructing January strategy.

Keywords: Emerging markets, January Effect, Market efficiency

JEL Classification: G14, G15

Suggested Citation

Koutianoudis, Theocharis and Wang, Shiyun, Is the January Effect Economically Exploitable? Evidence from Athens Stock Exchange (August 15, 2002). Available at SSRN: https://ssrn.com/abstract=329380 or http://dx.doi.org/10.2139/ssrn.329380

Theocharis Koutianoudis (Contact Author)

University of Manchester - Division of Accounting and Finance ( email )

Manchester
United Kingdom

Shiyun Wang

University of Sheffield - School of Management ( email )

9 Mappin Street
Sheffield, S1 4DT
United Kingdom

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