This study concentrated on testing the real constant seasonal patterns of the US markets and concluded that almost 75% of the data for the period of 90 years showed a positive impact on the rate of stock returns during the second half of the month of December. The authors are confident in claiming that the second half of the month of December exhibits an extraordinary performance with respect to the stock returns in US stock exchanges.
However Thaler (1987) has a different opinion to offer. According to him there has been no positive impact of the stock returns in the DJIA during the second half of the month of December and therefore there can be no higher returns during the month of January from the DJIA index. He argues that DJIA index consists of the stock values of only larger firms and in order to find the real January effect it is necessary to consider the stock returns in respect of smaller firms only where the returns would be able to exhibit greater weight than their market value as consisted in the index. However Thaler (1987) comments that about one-third of the annual returns have occurred during the month of January alone perhaps in respect of the stocks of smaller firms.
The study of Marrett and Worthington's (2006) found that considerably higher stock returns occur in January only with respect to small cap and retail firms. By empirical data the authors proved that the results of previous studies with respect to monthly seasonality can be considered only in so far these two classes of shares are concerned. Wang and Koutianoudis (n.d.) reiterate that during the month of January the investors are able to make larger gains in their dealings in stocks. The reason behind their analogy is that such returns are possible due to the behaviour of the markets during January which is the month to acquire back the securities disposed off during the month of December when there is likely to be a decline in the market indicator. This strategy is usually described as 'bed-and-breakfasting'. Alternatively the strategy is also called as 'buy-and-hold'. Therefore, there is strength in the argument that January effect could be regarded as an investment strategy that will result in profits to the investors.
Wang and Koutianoudis (n.d.) further observed that the stock returns during the month of January are found to be larger than that of other months and it happens only when the markets face stable and upward periods. On the other hand when the market traverses through downward period, the January effect seems to take an opposite direction. At that point of time the stock returns are significantly lower than most of the other months of the year.
Kim and Park (1994) observed during the periods of later half of December and first half of the month of January the stock markets are experiencing mostly a holiday effect in the United States. Researchers have found that the mean values of the stock returns during the pre-holiday periods in all the three major US stock markets were much higher than all other days of the year. Studies have proved that the January effect really takes off during the last day of December. They also have suggested a