The January Effect Appears To Be Occurring As The Year Ends At The KCBT

The market phenomenon dubbed the January Effect appears to be occurring at the Kansas City Board of Trade. In recent weeks the Value Line® contracts have been outperforming most other financial indexes on a fairly consistent basis. This held true yesterday as the Value Line contracts outperformed most of the other financial indexes. Investors have been buying the Mini Value Line futures contract and selling other stock index futures contracts, particularly the S&P. Yesterday this led to a big spike in open interest, with a 40.5 percent increase noted at the conclusion of yesterday's trade. The January Effect is the tendency for stock returns to be larger in January than in any other month of the year, especially for the stocks of small companies. Whether the general market tone is up or down, January Effect research shows small stocks tend to outperform large stocks at the turn of the year. Since 1926 the January Effect has occurred 90 percent of the time, according to research. The Value Line Arithmetic Index contains approximately 1,650 stocks including blue-chip, mid-size and small-cap issues from a wide variety of industries, and they are equally weighted, making the Value Line the broadest-based of the major stock indexes with futures contracts. Other stock indexes are weighted by capitalization (the stock price multiplied by the number of shares outstanding) or by price. KCBT floor traders said that they expect the phenomenon to continue occurring well into the month of January. Factors that could be impacting the effect this year include tax-loss selling, the relationship between value and growth stocks, mergers, the predominance of Internet stocks and Y2K. The Kansas City Board of Trade has published more information on the January Effect, including an in-depth MarketWatch newsletter . These are available by email, fax or postal mail by contacting the Kansas City Board of Trade marketing department.