CXO Advisory Group note another research piece on the January effect. For those of you unfamiliar with the January effect there is a wiki entry on the phenomenon. This is in addition to another paper highlighted recently.

Mark Haug and Mark Hirshcey’s paper simply titled, “The January Effect” finds evidence that the effect is “alive and well” for smaller capitalization stocks. From the abstract:

This paper uses broad samples of value-weighted and equally-weighted returns to document the fact that abnormally high rates of return on small-cap stocks continued to be observed during the month of January. The January effect in small cap stock returns is remarkably consistent over time, and does not appear to have been affected by passage of the Tax Reform Act of 1986. This finding adds new perspective to the traditional tax-loss selling hypothesis, and suggests the potential relevance of behavioral explanations. After a generation of intensive study, the January effect is alive and well, and continues to present a daunting challenge to the Efficient Market Hypothesis.

In short, as January approaches be on the lookout for opportunities in small-cap value stocks.