CFA Practice Question

CFA Practice Question

According to the January effect, which statement is MOST justifiable? Investors can earn abnormal returns by:
A. buying any stock in December and selling it at a profit in a January rally.
B. shorting small company stocks in December and by buying them back in January.
C. investing in value stocks in December that are likely to appreciate in January.
Explanation: Prices of stocks that lost value during the year go up in the month of January. Such stocks are most likely to be value stocks, not growth stocks by definition. An investor can earn abnormal returns by buying them in December and selling them in January.

User Contributed Comments 2

User Comment
pjdeschenes I saw A as being pretty similar to C. I guess you have to specify a value stock (C) or any stock (A).
pstebelp Agreed, no significant difference between A & C, except that A refers to any stocks and C refers to value stocks.
You need to log in first to add your comment.