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Bridge over ocean
1 July 2003 Financial Analysts Journal Volume 59, Issue 4

A December Effect with Tax-Gain Selling?

  1. Honghui Chen
  2. Vijay Singal, CFA

We present evidence on the December effect. When investors do not sell winner stocks in December but postpone their sale to January so that capital gains will not be realized in the current fiscal year, the “winners” appreciate in December. The December effect is relatively easy to arbitrage. We also present evidence regarding the persistence of the January effect and note that the January effect continues because it is difficult to exploit profitably.

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