Showing posts with label january effect. Show all posts
Showing posts with label january effect. Show all posts
Thursday, 26 June 2014
J is for January Effect
The January Effect is the observation that small cap stocks consistently outperform markets in January. It's one of a number of calendar related anomalies that suggest there's a peculiar interaction between people, markets, tax regimes and the environment. You can take the investor out of their natural environment, but you can't take the natural environment out of the investor.
Wednesday, 25 May 2011
Profit From Self Knowledge
Gnôthi seauton! and is this the prime
And heaven-sprung adage of the olden time!
Say, canst thou make thyself? Learn first that trade;
Haply thou mayst know what thyself had made.
And heaven-sprung adage of the olden time!
Say, canst thou make thyself? Learn first that trade;
Haply thou mayst know what thyself had made.
(Samuel Coleridge – Self Knowledge)
Behavioral Moneymaking
It’s easy to talk about the fundamental errors people make in investment but, in truth, we rarely get to see this in action. To judge from the terabytes of trading derring-do published daily you’d be hard pressed to find anyone who actually loses money on the stockmarket. Most people seem to adopt the attitude that, if these behavioral biases make a difference, it’s to other people and never themselves. And often, they believe their own rhetoric.
We can’t usually look inside individuals’ trading histories to point out the mistakes they’ve made, most research is based on gross, anonymised data. However, occasionally some anomaly allows us shed some light on the actual practice of real investors and such an opportunity arose with the trial and conviction of Martha Stewart for obstructing justice in an insider dealing case. Stewart may be a fine host, but she’s no better – or worse – at investing than most of us.
Wednesday, 30 December 2009
Rock On, January Effect
Born Lucky
Calendar related effects are amongst the most obvious manifestations of the way that collective human mental misbehaviour can impact stockmarket returns. Anomalies like the much observed January Effect, the outperformance of small cap stocks in the US markets during January, point to some kind of systematic bias in the structure of markets.
In fact there’s little doubt that the calendar does impact upon human behaviour but what’s in question is how it does so. Consider, for instance, the odd fact that people born between May and July consistently rate themselves as luckier than those who enter life’s great adventure between October and December. Nothing strange in that, you might think, until you discover that summer babies really are luckier than their winter siblings.
Calendar related effects are amongst the most obvious manifestations of the way that collective human mental misbehaviour can impact stockmarket returns. Anomalies like the much observed January Effect, the outperformance of small cap stocks in the US markets during January, point to some kind of systematic bias in the structure of markets.
In fact there’s little doubt that the calendar does impact upon human behaviour but what’s in question is how it does so. Consider, for instance, the odd fact that people born between May and July consistently rate themselves as luckier than those who enter life’s great adventure between October and December. Nothing strange in that, you might think, until you discover that summer babies really are luckier than their winter siblings.
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