The January Anomaly: Effects of Low Share Price, Transaction Costs, and Bid-Ask Bias

Ravinder K Bhardwaj and LeRoy D Brooks

Journal of Finance, 1992, vol. 47, issue 2, 553-75

Abstract: The January effect is primarily a low-share price effect and less so a market value effect. In the recent 1977-86 period, after-transaction-cost raw and excess January returns are lower on low-price stocks than on high-price stocks. Failure of informed traders to eliminate significantly large before-transaction-cost excess January returns on low-price stocks is potentially explained by higher transactions costs and a bid-ask bias. At the least, the January anomaly found in prior tests is not persistent and, thereby, not likely to be exploitable by typical investors. Copyright 1992 by American Finance Association.

Date: 1992
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