The January effect is the tendency for stock prices to rise in the first month of the year following a year-end sell-off for tax purposes.
 | | January Effect | | The January effect is a seasonal increase in stock prices during the month 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. | | Breaking it Down: | | The January effect is a hypothesis, and like all calendar-related effects, suggests that the markets as a whole are... | | Read More » | | Related to "January Effect" | | | | Rally | | A rally is a period of sustained increases in the prices of stocks, bonds or indexes, which can occur during either a bull or a bear market. | | Read More » | | | Capital Gain | | Capital gain is an increase in a capital asset's value that is realized when the asset sells for more than the purchase price. | | Read More » | | | Bear Market | | A bear market is a market in which securities prices fall and widespread pessimism causes the negative sentiment to be self-sustaining. | | Read More » | | | Bull Market | | A bull market is a financial market of a group of securities in which prices are rising or are expected to rise. | | Read More » | | |  | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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