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Journal of Finance Vol. 44 No. 1 1989

Portfolio Rebalancing and the Turn‐of‐the‐Year Effect

Jay R. Ritter1; Navin Chopra1,2

1 University of Pittsburgh · 2 Oral Roberts University

open access

Abstract

This paper finds that, for the 1935–1986 period, the market's risk‐return relation does not have a January seasonal. The findings differ from those of other studies due to the use of value‐weighted, rather than equally weighted, portfolios. Inferences are sensitive to the weighting procedure because of the small‐firm return patterns in January. In particular, even in those Januaries for which the market return is negative, small‐firm returns are positive, and they are more positive the higher is beta. This is consistent with the portfolio rebalancing explanation of the turn‐of‐the‐year effect.

DOI
10.1111/j.1540-6261.1989.tb02409.x
Volume
44
Issue
1
Pages
149-166
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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