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Journal Article

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
Published by: Wiley for the American Finance Association
DOI: 10.2307/2328280
Stable URL: http://www.jstor.org/stable/2328280
Page Count: 18
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Portfolio Rebalancing and the Turn-Of-The-Year Effect
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Abstract

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.

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