Every
beginning of the year, investors generally expect profits overflow from the
January effect on the stock market. What the January Effect (Effect January)?
What caused it? Is January Effect occurs also in the local stock market, or the
IDX (Indonesia Stock Exchange)? Check out the answers here
WHAT IS JANUARY EFFECT?
January
Effect (Effect January) is a trust in which stock prices tend to rise in
January. The calendar effect creates an opportunity for stock investors to buy
shares in a lower price and sell it before January after its share price.
WHAT IS THE CAUSE OF JANUARY EFFECT?
January
effect was first observed around 1942 by a banker named Sidney B. Wachtel. He
noted that since 1925, there was an increase in the share price in January,
mainly in small cap stocks. There are several theories that could explain the
January Effect. The most common theory explaining this phenomenon is that
individual investors tend to sell shares to avoid taxes at the end of the year.
Then they buy back the shares in January, its price increased. Another theory
says the cause is mostly individual investors who work receive a year-end
bonus, then the bonus to buy shares in January.
JANUARY EFFECT IN THE US STOCK
MARKET
The
figure below shows the returns in the US stock market in January from the year
1951 to 2011. If seen, until the 1980s phenomenon is still quite effective
January Effect. But once it started insignificant effect. This could be because
many people are using a tax sheltered investment plan, so no need to sell
shares at the end of the year.
JANUARY EFFECT IN INDONESIA STOCK
MARKET
Is
January Effect occurs in the Indonesian stock market? Based on data for
1995-2015 (21 years), JCI rose as much as 14 times, and down seven times in
January. So there are about 66.6% probability of happening January Effect in
the Indonesian stock market. This probability is smaller when compared to the
possibility of window dressing in the stock market.
However,
the data is not a guarantee that the January effect is always happening in the
stock market. Keep looking at the fundamentals or chart if you want to take
advantage of the likely occurrence of the January effect on the stock market.
Hopefully
this article helpful