The January Effect: A South African Perspective
The January Effect: A South African Perspective

Summary/Abstract: The January effect, and its impact in the financial world, is one of the most researched calendar irregularities. The purpose of this study is to examine if there is a January influence on the South African stock market. Aggregate and sectorial indices of Johannesburg Stock Exchange (JSE)were examined. We analyse the January effect by Generalized Auto Regressive Conditional Heteroskedasticity Model (GARCH), exponential GARCH (EGARCH) and threshold GARCH(TGARCH) models. Findings from the mean equation showed a positive January effect for the Top 40and Basic materials, whilst for the variance equation, a negative January anomaly was found in the Top40, Health care, Telecommunications, and Technology indices. The January seasonal investment style is recommended for improving returns in Basic materials sector. Investing in the Telecommunications sector in January will assist an investor in portfolio diversification and reduce risk. The findings show that the January effect has shifted to other months. Given the limits of previous research, this study adds to the body of knowledge on calendar anomalies by bringing a South African viewpoint to the debate of the January anomaly and extending the analytic period to 1995-2018.

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