Return seasonality in stocks and their underlying assets: tax-loss selling versus information explanations

Results of tests contrasting tax-loss selling with intertemporalinformation variation as explanations of the January seasonalin stock returns are reported. Closed-end fund shared displaythe typical size-related January seasonal while their net assetvalues do not. Interpreting the net asset value return as aproxy for information about under-lying assets, this resultindicates information variation is not a necessary conditionfor the January effect in stocks. The share returns at the turnof the year are negatively related to their mean preceding yearreturns and positively related to the standard deviations oftheir preceding year returns. These results are consistent withtax-loss selling.