Calendar Based Price Anomalies

Overview

Weekend Effect

The weekend effect is the observation that stocks tend to do better on Fridays and worse on Mondays than on average. This is generally thought to be due to positive emotions of traders on Friday given the coming weekend and the corresponding letdown that occurs on Monday, which colors their trading activity.

January Effect

Small stocks that have a recent losing track record are seen to rise in January. This effect is explained by the window dressing that occurs at the end of the year. Fund managers will sell losing stocks at the end of the year, and purchase them back in January. This is done because current fund holdings are generally published to the clients of the fund at the end of the year, and under scrutiny. Fund managers like to show that all the stocks in the fund have winning records, even if they believe that a stock with a losing record is a good buy.

Thus, managers tend to sell the stocks that they dont wish to have to explain in December, only to re-purchase them again in January.