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The Buying and Selling Behavior of Individual Investors at the Turn of the Year

Jay R. Ritter
The Journal of Finance
Vol. 43, No. 3, Papers and Proceedings of the Forty-Seventh Annual Meeting of the American Finance Association, Chicago, Illinois, December 28-30, 1987 (Jul., 1988), pp. 701-717
Published by: Wiley for the American Finance Association
DOI: 10.2307/2328193
Stable URL: http://www.jstor.org/stable/2328193
Page Count: 17
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The Buying and Selling Behavior of Individual Investors at the Turn of the Year
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Abstract

The average returns on low-capitalization stocks are unusually high relative to those on large-capitalization stocks in early January, a phenomenon known as the turn-of-the year effect. This paper finds that the ratio of stock purchases to sales by individual investors displays a seasonal pattern, with individuals having a below-normal buy/sell ratio in late December and an above-normal ratio in early January. Year-to-year variation in the early January buy/sell ratio explains forty-six percent of the year-to-year variation in the turn-of-the-year effect during 1971-1985.

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