SSRN-The January Effect - A New Piece for an Old Puzzle by Jason Fink, Kristin Fink, Jonathan Godbey

You probably have all heard of the January effect. It is the historical fact that stocks have done better in January than in other months. That much all researchers agree on.

Why? That is a very good question. Some seems to be taxes, some size, but now Fink, Fink, and Godbey find that the age of the firm also matters. Specifically young firms out perform old firms in January even after controlling for size and other factors.

SSRN-The January Effect - A New Piece for an Old Puzzle by Jason Fink, Kristin Fink, Jonathan Godbey:

"For decades the finance profession has noticed the tendency of equity prices, most noticeably for small stocks, to rise in value in the month of January. The small stock January effect appears to have been significant over the last thirty five years. However, we demonstrate that even after controlling for both the size of the firm and systematic factors, young firms experience significant and abnormally positive January returns. This age effect has several possible sources, including firm level information uncertainty in January or increased investor demand related to young firms."

Now I can say this about the paper since the authors are friends of mine and if you can't pick on friends who can you pick on? Uh, Good timing.

How so? Well the paper came out in October. I waited with the intent of using in in January as soon as the market turned up. So what happens? I will let CNN tell you:

From CNNMoney.com:

" It was the worst January ever for the Dow industrials and S&P 500, according to Stock Trader's Almanac data.

The Dow lost 8.8% and the S&P 500 lost 8.6% in the month.

The Nasdaq's loss of 6.4% was eclipsed by last January's loss of 9.9%. That 2008 loss was the worst in the tech average's history, going back to its inception in 1971."

Oh well. Maybe next year. OR (and this is stated entirely without proof since as far as I know there is not a "new firm" index), given the average age of firms in the NASDAQ is less than that of the DOW and S&P 500, maybe it supports the paper even more.