Abstract
Many possible explanations have been suggested for the January effect, with tax considerations receiving the most attention. This analysis suggests a new explanation. The data show that money supply announcements during January contribute at least as much as tax considerations to explaining stock returns during the first five trading days in January. The seasonal behavior of money during December and January appears to be responsible for the money-supply-announcement effect. In addition, the end-of-year seasonal pattern of the money supply is present in other countries and was present before the adoption of personal taxes, so money supply announcements may offer a more consistent explanation of the January effect than tax considerations.
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Chen, LL., Fishe, R.P.H. Seasonal money movements and the January effect. Atlantic Economic Journal 22, 26–42 (1994). https://doi.org/10.1007/BF02298857
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DOI: https://doi.org/10.1007/BF02298857