The relationship between January Effect and growth of earnings

• Main Authors: Lin, Po-yen, 林伯諺
• Other Authors: Cheng, Ding Wang
• Format: Others
• Language: zh-TW
• Published: 2000
• Online Access: http://ndltd.ncl.edu.tw/handle/04753580250103842565

碩士 === 國立政治大學 === 會計學系 === 88 === Abstract Over the past fifty years, January Effect has always been an interest topic. However, no conclusive explanations have ever been offered. January is the time for management of corporations and investors to confirm the performance of last year and to form expectations of the coming year. Therefore, it may be reasonable to hypothesize the January Effect is related to the actual profitability of last year and the expected earnings of current year. This study first examine whether Taiwan’s stock market has January Effect. Monthly returns of the sample companies for the period 1994 to 1999 are tested. The result indicated that there is a negative January Effect, which runs contrary to most of the previous research findings. However, recent studies on Taiwan’s stock market have drown more conclusions refuting the hypothesis that Taiwan’s stock market has positive January Effect. This study further examines the relationship between the January cumulative abnormal returns of sample companies and the unexpected earnings of the previous year and the first quarter of the current year. Regression model is employed. The result indicates that there is negative, though not significant, relationship. The earnings are then further partitioned into permanent and transitory. A new regression analysis using the permanent unexpected earnings is performed. The result is the same but more significant. When company size using the market value as a proxy is added to the regression model, it shows that small companies tend to have higher cumulative abnormal returns. In summary, this study finds no significant relationship between the stock returns in January and the unexpected earnings of the previous year and/or the first quarter of the current year.