Option Investor

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January Effect

The January effect is something of a phenomenon in the eyes if many investors. Historically, stocks tend to rise from the last day of December through the fourth day of January. This is attributed to year-end selling which occurs due to portfolio "window dressing", the recognizing of capital gains, to create tax-losses, or for holiday spending money. The depressed prices that result from all of the year end selling can work to provide some rather attractive entry points for bargain seeking investors. This is most likely the catalyst behind the January Effect.