In stock markets, January Effect refers to the general rise in share prices during the month of January
This tendency is generally attributed to investors, who sold their losing positions before the New Year to lock in tax advantages from their capital losses, re-entering the market and buying back positions in January. The rush of investors buying in January has had the tendency to cause markets to rise.
The January Effect is thought to affect small-cap stocks more so than mid and large cap stocks, and in recent year investors have found greater tax advantage through retirement plans that shelter liability until retirement, diminishing the impact of the January Effect. But even in the blue-chip heavy Dow Index below, nine out of the thirteen Januaries are decidedly up.