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Portfolio Rebalancing and the Turn-Of-The-Year Effect
Jay R. Ritter and Navin Chopra
The Journal of Finance
Vol. 44, No. 1 (Mar., 1989), pp. 149-166
Stable URL: http://www.jstor.org/stable/2328280
Page Count: 18
You can always find the topics here!Topics: Financial portfolios, Coefficients, Market value, Finance, Investment risk, Value weighted index, Securities returns, Weighted averages, Point estimators, Security portfolios
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This paper finds that, for the 1935-1986 period, the market's risk-return relation does not have a January seasonal. The findings differ from those of other studies due to the use of value-weighted, rather than equally weighted, portfolios. Inferences are sensitive to the weighting procedure because of the small-firm return patterns in January. In particular, even in those Januaries for which the market return is negative, small-firm returns are positive, and they are more positive the higher is beta. This is consistent with the portfolio rebalancing explanation of the turn-of-the-year effect.
The Journal of Finance © 1989 American Finance Association