January/ Capricorn effect by PnillipCapirtal Market watch

This effect is the tendency of the stock market to rise between December 31 and the end of the first week in January. This is because investors choose to sell their stock before the year end in order to claim capital loss for tax purpose. Hence once the tax year passed, people will reinvest their money back into the stock market. Even though it has occurred numerous times in history, apparently it is difficult to profit from this because everyone knows this is going to happen, and hence will price in this factor.

In this video, the following was also addressed :

• Jan effect shows that from 1802-2004, Jan's return is highly than the other months for 16.9% of the time ( not very high in my opinion)
• Works best on countries with no tax on capital gains i.e Singapore ( But based on my own research from IRAS on tax laws. Apparently capital gains/loss does not affect on the individual level. It only affects companies. Hence I would think that this is more applicable to hedge funds and investment companies. By 'making a loss' this year, there are able to reduce their tax for this working year)
  
• Works best on small caps stock
• Might actually be good to invest in Singapore stocks are we are presently the lowest in PE ( price to earnings) ratio.
  

1. Singapore PE=6
2. Hang Seng (Hong Kong) PE = 8.7
3. Shang Hai PE= 14
4. Dow Jones PE=10
5. Thailand PE = 7