THE JANUARY ANOMALY - EFFECTS OF LOW SHARE PRICE, TRANSACTION COSTS, AND BID-ASK BIAS

The January effect is primarily a low-share price effect and less so a market value effect. In the recent 1977-1986 period, after-transaction-cost raw and excess January returns are lower on low-price stocks than on high-price stocks. Failure of informed traders to eliminate significantly large before-transaction-cost excess January returns on low-price stocks is potentially explained by higher transaction costs and a bid-ask bias. At the least, the January anomaly found in prior tests is not persistent, and thereby, not likely to be exploitable by typical investors.