Yes, Wall Street, There Is A January Effect! Evidence from Laboratory Auctions

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There is a large literature using financial market data on the causes of a “January effect,” which produces higher stock prices in January than in other months of the year. We present the first experimental study of this phenomenon in the context of two well-known auction experiments. After controlling for variables that could influence subject bids, such as differences in private values, cumulative earnings, and learning effects, the prices in the January markets were systematically higher than those in December, a difference that is economically large and statistically significant. The results provide support for the conjecture that psychological factors may contribute to the well-documented January effect in empirical stock market data.