The January Barometer

Abstract

Many investment practitioners rely on the “January barometer,” arguing that: “as goes January, so goes the rest of the year.” However, the empirical literature has not provided any evidence that the signs of January returns have superior predictive value for future market performance vis-´-vis the signs of stock returns in any other calendar month. By comparing the “January barometer” with other calendar month “barometers,” we demonstrate that the signs of January returns are superior predictors of the stock market for the next 12 months vis-´-vis the signs of stock returns in any other calendar month. Thus, our results add credibility to the notion of “January barometer.”

TOPICS: Theory, in markets