The January Effect in Preferred Stock Investments
Journal article by Daniel E. Vetter, John R. Wingender; Quarterly Journal of Business and Economics, Vol. 35, 1996
Journal Article Excerpt
The January effect in preferred stock investments. by Daniel E. Vetter , John R. Wingender INTRODUCTION A January anomaly regularly has been detected in common stock returns, but it has not been investigated in preferred stock returns. Recent studies have tried to test whether or not the January effect is market dependent or financial asset dependent. For example, the January effect has been found in the common stock returns of many different countries, in certain bond series, and in the derivative securities of options and convertible bonds. Studying the behavior of the preferred stock market is important. First, the preferred equity market still plays an important role as a source of capital for U.S. corporations. Second, if evidence of seasonality is found in the preferred stock market, studies that examine the reasons for seasonality can focus on factors common to all markets. If seasonality is not found in the preferred stock market, then researchers can concentrate on factors unique to the other markets. Therefore, in this study we extend the investigation into the previously unexamined market of preferred stock. The following section reviews the literature on the January seasonal in various markets and financial assets. The sample is described. In assessing whether the January effect is present in preferred stock returns, both an index (Standard & Poor's preferred stock price index) and individual preferred stock returns are investigated. In the methodology section the tests for seasonality are presented, and the results document the substantial January seasonal in the two samples of preferred stock returns. PREVIOUS RESEARCH A pattern of returns for financial assets that is much higher in the month of Januar... |
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