The January Effect Explained
Updated
In this post, I'll be talking about the January Effect as the stock market looks to open for the first time in 2021.
The January Effect
- This is a hypothesis that securities' prices rise in January more than any other month of the year.
- This allows investors to purchase prices prior to January, when it's relatively undervalued, and sell for a profit in January when prices are valued at the right price/overvalued.
- The premise of this hypothesis is that the market is inefficient
- There have been many arguments posed to explain this phenomenon
- Some say that this is due to the sell-off that occurs during December, as investors realize their capital gains
- Others say that it has to do with people investing their year-end bonus into the financial markets
- Nonetheless, it's important to understand that the January Effect does not take place all the time.
Mike's Insight
A lot of the major companies, almost dominantly tech companies, which lead the indicators have had a decent year despite the chaos. Additionally, with the stimulus package and expectations regarding covid vaccines, I believe that there's a high probability that we'll witness the January Effect this year.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
The January Effect
- This is a hypothesis that securities' prices rise in January more than any other month of the year.
- This allows investors to purchase prices prior to January, when it's relatively undervalued, and sell for a profit in January when prices are valued at the right price/overvalued.
- The premise of this hypothesis is that the market is inefficient
- There have been many arguments posed to explain this phenomenon
- Some say that this is due to the sell-off that occurs during December, as investors realize their capital gains
- Others say that it has to do with people investing their year-end bonus into the financial markets
- Nonetheless, it's important to understand that the January Effect does not take place all the time.
Mike's Insight
A lot of the major companies, almost dominantly tech companies, which lead the indicators have had a decent year despite the chaos. Additionally, with the stimulus package and expectations regarding covid vaccines, I believe that there's a high probability that we'll witness the January Effect this year.
If you like this educational post, please make sure to like, and follow for more quality content!
If you have any questions or comments, feel free to comment below! :)
Comment
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