The cross-section of January effect

Arbab Khalid Cheema, Wenjie Ding, Qingwei Wang

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

We examine the cross-sectional January effect among portfolios that long sentiment-prone and difficult-to-arbitrage stocks and short sentiment-insensitive and easy-to-arbitrage stocks. These long-short portfolios on average earn over 20 times higher returns in January than in a non-January month. 85% of the cross-sectional January effect comes from its long legs, consistent with a sentiment-driven mispricing explanation. The cross-sectional January effect persists over time and remains significant after accounting for common risk factors and time-varying factor loadings.
Original languageEnglish
Pages (from-to)513–530
Number of pages18
JournalJournal of Asset Management
Volume24
Early online date12 Aug 2023
DOIs
Publication statusPublished - Oct 2023
Externally publishedYes

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