January Effect

A calendar anomaly in which small-cap stocks tend to outperform in the first few weeks of January, historically attributed to tax-loss selling in December followed by reinvestment in the new year. The effect was well-documented in academic studies from the 1970s onward, but like many market anomalies, it has weakened over time as more traders have attempted to exploit it. Some analysts argue the effect has shifted earlier, with the "Santa Claus rally" now capturing much of the same dynamic.