#Fincabulary 8- January effect

Meaning: A seasonal  increase in stock prices during the month of January

Explanation: It refers to a pattern exhibited by stocks, particularly small-cap stocks, in which they’ve shown a tendency to rise during the last several trading days in December and then continue to rally throughout the first week of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains, prompt a sell-off. Another possible explanation is that investors use year-end cash bonuses to purchase investments the following month.