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

  • Author(s): JAY R. RITTER
  • Published: Apr 30, 2012
  • Pages: 701-717
  • DOI: 10.1111/j.1540-6261.1988.tb04601.x


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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