Buzzword: January effect

Marketplace Staff Dec 29, 2006

Noise makers and a bottle of bubbly bring us this week’s Marketplace Money buzzword, January effect. The January effect is the stock market’s tendency to increase in value between New Year’s Eve and the first week of the year. Why? Because investors who just sold stocks to save on last year’s taxes are buying them up again. This doesn’t mean easy earnings for your Christmas cash. The January effect’s no secret, so stocks may be pricy. Plus, studies show only small cap stocks really feel light headed, that is if there’s a January effect at all. Some experts say it no longer exists.

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