Date of this Version
Journal of Financial Economics
A ‘tax-loss selling’ hypothesis has frequently been advanced to explain the ‘January effect’ reported in this issue by Keim. This paper concludes that U.S. tax laws do not unambiguously predict such an effect. Since Australia has similar tax laws but a July–June tax year, the hypothesis predicts a small-firm July premium. Australian returns show pronounced December–January and July–August seasonals, and a premium for the smallest-firm decile of about four percent per month across all months. This contrasts with the U.S. data in which the small-firm premium is concentrated in January. We conclude that the relation between the U.S. tax year and the January seasonal may be more correlation than causation.
© 1983. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/.
Brown, P., Keim, D. B., Kleidon, A. W., & Marsh, T. A. (1983). Stock Return Seasonalities and the Tax-Loss Selling Hypothesis: Analysis of the Arguments and Australian Evidence. Journal of Financial Economics, 12 (1), 105-127. http://dx.doi.org/10.1016/0304-405X(83)90030-2
Date Posted: 27 November 2017
This document has been peer reviewed.