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Trading > Amateur Investors

The January Effect: Does it Work?

Bob Kleyla | Tue, 01/27/2009 - 2:17pm | Amateur Investors, Historical Dow Performance, January Effect |  4 comments

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Many claim that how January performs will give a clue for how the year will end up.  Looking at the data in the Dow going back to 1897 yields the following results as shown in the table below.

Since 1897 if January has had a positive Return then the chance of a positive Yearly Return is 81%.   Meanwhile if January had a negative Return then the chance of a negative Yearly Return has been 67%.   Thus statistically there has been a stronger correlation with a positive Return in January versus a negative Return.

(+) Jan (+) Jan (-) Jan (-) Jan
(+) Year (-) Year (-) Year (+) Year
# of Years 59 14 26 13
81% 19% 67% 33%

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