Author: James Picerno · January 5th, 2012
The so-called January effect for the stock market (S&P 500) looks quite weak when measured on a monthly basis, and it doesn’t offer much more encouragement as a signal for the 1-year-ahead return horizon either.
To understand why, let’s compute average returns for each month for the past 20 years. Next, let’s plot those monthly average returns against the average of subsequent 1-year returns, measured from the end of the month in question. The result is the chart below.
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