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January effect
The January effect is general stock price increase during the month of January. The increase is caused by rally of investor who buys stock that has dropped at the end of December. This happened because investor selling stocks at December to create tax losses to offset any capital gain. The January effect has more effect on small-caps than mid/large caps. This trend has been less pronounced in recent years because it has been known by public. Another reason the January effect is now considered less important because more people are using tax-sheltered retirement plans and therefore have no reason to sell at the end of the year for a tax loss.
Knowing this effect, we could benefit from this, by looking for bounce prospect. Looking at the above characteristic of January effect, we could find these kinds of stocks from stocks that have suffered high loss, >1 current ratio, < 0.5 debt to equity, good historical ROE. (This is just an opinion and not guarantees profit).



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