The January effect is predicated on the theory that investors tend to sell of their losing stocks towards the end of the year in order to write the losses off on their taxes. Therefore, according to the January effect, stocks will tend to dip towards the end of the year and rebound in January when tax-loss selling has ended.
The January effect is supposed to have a greater affect on small-cap stocks (as opposed to large-caps) since it is assumed that a relatively small amount of tax-loss selling will still have a significant impact on a relatively small, thinly-traded company
Analysis of broad samples of value-weighted and equal-weighted returns of U.S. equities documents that abnormally high rates of return on small-capitalization stocks continue to be observed during the month of January. This January effect in small-cap stock returns is remarkably consistent over time and does not appear to have been affected by passage of the Tax Reform Act of 1986. This finding brings new perspective to the tax-loss selling hypothesis and suggests that behavioral explanations are relevant to the January effect. After a generation of intensive study, the January effect continues to present a serious challenge to the efficient market hypothesis.
So there you have it Gang.... easy huh?....Not really at all useful to those that ONLY invest in the majors....BUT ( and this is a VERY BIG BUT....no, not mine....nice try though )....if you are like me, and ONLY invest in small caps and/or penny stocks...THIS IS OUR TIME OF YEAR!!!!!!!
As month end is indicative of back office selling ( credit departments of EVERY brokerage houses clearing off their books for adjusted loan values ), so is the end of the year for penny stocks. I mean.... it's simple to follow....how many penny stocks that you know of this year alone, have declined in value? If you're a full time VULTURE, like myself, out of every 10, and average of 6 or more will be losers....therefore, "we" sell to "book" the loss and apply it to our gains for the year ( if any..)....are you following me?.....so....if you've done your own DD on a few "juicy" penny plays and are finding yourself at a loss.... you may not be a loser after all.......if your stock is thinly traded....but trades regularly ( VERY IMPORTANT----PLEASE PAY CLOSE ATTENTION TO THAT )....SELL you position ON Dec.31 before noon.
Get a VERY comfortable blanket and some coffee and be prepared to sleep next to your computer ( or have your finger on speed dial to your Broker )....on Jan. 2 ( Not 1st as we're closed ) at 6:30am....BUY back in....more than likely, you'll be buying back at levels slightly lower than where you sold the day earlier...TADA!!!....you're already a head for 2007!!!!!
Pretty elaborate spam on that one, we don't suggest anyone buy anything here, sorry, Thanks for the rest of your report though!!!
This Article was written by Placer_foot member of StockHideout.com
If you haven't heard of penny stocks, maybe you should stop and read this. Penny stocks, as odd as it may seem, are responsible for the vast majority of stock trading in the US each day, accounting for over three-fifths of the NASDAQ stocks traded and over three-quarters of the stocks traded on the NYSE. But what are penny stocks, really?
Penny stocks, as their name implies, are stocks with a low share price, often under a dollar. But this does not mean much in terms of their trading, because they are most often traded in lots of at least a thousand, and more often tens of thousands, of shares.
What are penny stocks when seen by entrepreneurs? Suppose you have a company selling widgets, and everyone who buys your widgets raves about them. You'd like to sell your widgets to the entire world, which really needs good widgets, but you don't have the money to manufacture them in sufficient numbers. So you decide to raise money by taking your company public. You need a million dollars, and you can sell your stock at any initial price you like.
But the chances of your being to sell a million shares of stock at $1 each are much better than your being able to sell 100,000 shares at $10 each, because more people will be willing take a chance on an unproven widget company for $1 than for $10. Same company, same amount of money, but cheaper stock. In your case, the question ?What are penny stocks?? can be answered with ?The way to get my company public.?
But for stock traders, the question ?What are penny stocks?? can produce multiple answers. Some will say that any stock which trades for less than $1 is a penny stock. Others say that a stock can be classified as a penny stock depending on the total market value of the company issuing it. Others have specific categories into which a stock must fit before being classified as a penny stock. For more info see http://www.pick-pennystocks.com/Articles/Penny_Stocks.php on Penny Stocks.
But all traders on the buy side of a penny stock trade will agree that penny stocks are the ones most likely to rapidly escalate in price and bring them substantial profits. And for those holding them, the question ?What are penny stocks?? can be answered with the statement that penny stocks are the ones you sell as soon as they are in profit, because they are simply too volatile to hold long term. In the penny stock world, the best time to take profits is as son as you have them.
And for the investment industry, the question,? What are penny stocks?? is answered with the single word,? Opportunity.? For the traders, they are an opportunity to make returns unheard of in other investments: for brokerage houses, they are a major source of trading commissions. For startup companies, they are the opportunity to grow. Penny stocks, for all their volatility, are an essential part of the American economic landscape.
Both Robs & Wade Robins are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Robs has sinced written about articles on various topics from Finances, Forex Trading Forex and Penny Stocks. Placer_foot member of StockHidoeut.com . Robs's top article generates over 18100 views. to your Favourites.
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