Date of Award


Degree Type

Honors Paper

First Advisor

Frank W. Bacon, Ph.D.


The purpose of this study is to test the weakform efficient market hypothesis by analyzing the effects of year end selling/buying and the January effect on stock price. Specifically, is itpossible to earn an above normal return at the beginning of the new year? Numerous past studies suggest that at year end investors sell underperforming stocks, thus negatively impacting stock price . Past studies also suggest the repurchase of previou$ year losers in January causing upward pressure on stock price. According to the weakform efficient market hypothesis, it is not possible to outperform the market - adjusted appropriately for risk - by using past information embedded in theyear end or January effect. A strategy of "buying low" tax loss losers in December and "sellinghigh" the same in January should not yield above normal returns if the market is weak form efficient. The market should adjust to this information sufficiently fast to disallow any investor 'searning an above normal risk adjusted return. Similar toprevious research on the January effect, evidence here observes negative year end returnsfollowed bypositive January performance. Results suggest that underperforming stocks post abnormal negative risk adjusted returns up to 60 daysprior to the last trading day of the year followed by significant positive returns during the month of January with significant positive returns commencing up to 20 days prior to year-end during 2010 and 2012 andfor the global sample. With return performance similar to previous studies, the market is not weakform efficient with respect toyear-end selling and the January effect. Evidence here suggests a possible bargain buying response toyear-end selling even before the year-end.



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