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.
 | | Term of the Day | Words to Know | | |  | | January Effect | | The January Effect is a perceived 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. | | 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 » | | | Anomaly | | Anomaly is a term describing the incidence when the actual result under a given set of assumptions is different from the expected result. | | Read More » | | | Window Dressing | | Window dressing occurs when a fund manager sells underperforming stocks and replaces them with attractive stocks for appearances' sake. | | Read More » | | | | | | CONNECT WITH INVESTOPEDIA | | | | | | | |
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