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On the Information Uncertainty Risk and the January Effect

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Author Info
Dongcheol Kim (Korea University Business School)
Abstract

I provide a risk-based rational explanation for the seasonal regularity of January in stock returns by suggesting a common risk factor related to the information uncertainty caused by earnings volatility. When the two-factor model with the market risk factor and this common risk factor is used, there is a remarkable improvement in explaining the January effect. With the adjustment of raw returns for risk through this two-factor model, the systematic pattern in the residual returns across firm size disappears. This risk factor also dominates the other risk factors in explaining the cross section of stock returns in January.

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File URL: http://www.journals.uchicago.edu/cgi-bin/resolve?JB790416
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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 79 (2006)
Issue (Month): 4 (July)
Pages: 2127-2162
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Handle: RePEc:ucp:jnlbus:v:79:y:2006:i:4:p:2127-2162

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  1. Bety Agnany & Henry Aray, 2007. "The January Effect across Volatility Regimes," ThE Papers 07/04, Department of Economic Theory and Economic History of the University of Granada.. [Downloadable!]
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This page was last updated on 2009-12-2.

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