Which of thefollowing is not one of the reasons of January effect?

　　Tax loss

　　Window dressing

　　New information

　　Solution: C

　　January effectCalendar anomaly that stock market returns in January are significantly highercompared to the rest of the months of the year, with most of the abnormalreturns reported during the first five trading days in January.  Also called turn-of-the-year effect.

　　The Januaryeffect contradicts the efficient market hypothesis because excess returns inJanuary are not attributed to any new and relevant information or news. A number of reasons have been suggested for this anomaly, includingtax-loss selling. Researchers have speculated that, in order to reduce theirtax liabilities, investors sell their "loser" securities in Decemberfor the purpose of creating capital losses, which can then be used to offsetany capital gains. A related explanation is that these losers tend to besmall-cap stocks with high volatility.

　　Anotherpossible explanation for the anomaly is so-called "window dressing", a practice in which portfolio managers sell their riskiersecurities prior to 31 December. The explanation is as follows: many portfoliomanagers prepare the annual reports of their portfolio holdings as of 31December. Selling riskier securities is an attempt to make their portfoliosappear less risky. After 31 December, a portfolio manager would then simplypurchase riskier securities in an attempt to earn higher returns. However,similar to the tax-loss selling hypothesis, the research evidence in support ofthe window dressing hypothesis explains some, but not all, of the anomaly.