The January Effect is a phenomenon in which stocks supposedly perform well during the first month of the year.
Investors can either buy stocks in December that are expected to benefit from the January Effect or buy stocks in January when prices are expected to be higher due to the effect.
Many investors claim that the January Effect is not real because it is at odds with the efficient markets hypothesis.
The best strategy, according to efficient market backers, is to buy stocks based on the stock’s underlying value — and not based upon dates in the yearly calendar.
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