On the Information Uncertainty Risk and the January Effect*
Year: 2006
Type: article
Abstract: I provide a risk-based rational explanation for the seasonal regularity of January in stock returns by suggesting a common risk factor related to the information uncertainty caused by earnings volatility. When the two-factor model with the market risk factor and this common risk factor is used, there is a remarkable improvement in explaining the January effect. With the adjustment of raw returns for risk through this two-factor model, the systematic pattern in the residual returns across firm size disappears. This risk factor also dominates the other risk factors in explaining the cross-section of stock returns in January.
Source: The Journal of Business
DOI: 10.1086/503659
Author: Dongcheol Kim
Institution: Korea University
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W1980730642