Abstract
This article updates the evidence found by Ortiz et al. (2010) in the Spanish stock market. Our results provide a lack of significant return anomalies around the first three quarter ends of the year, which questions the role of window dressing in these return patterns. Nevertheless, the results confirm a significant turn-of-the-year effect for small-cap stocks with poor return records, which may be consistent with the tax-loss selling hypothesis despite the wash sales regulation. Using a new approach, we find that this January effect is a widespread sector anomaly. Finally, the turn-of-the-year anomaly definitively exceeds the first trading days for the small-cap stocks.
Notes
1 26 USC Section 1091 codifies the US wash sales rules, which identifies this practice as a taxpayer buying substantially identical stocks within 30 days before or after the sale of the stocks at a loss.
2 The rationale of the Spanish Law 40/1998 and its consequent Regulation in the RD 3/2004 is quite similar to the US wash rules, but the time limit is extended to two months before or after the trade that caused the capital loss.
3 According to the Spanish Law 35/2003, Spanish mutual funds must report, among other components, the detailed portfolio held at the end of every quarter end.
4 The lowest number of trading days found in a quarter is 58.
5 The Spanish benchmark Ibex-35 decreased by approximately 40% during the period 2007–2013.
6 We find a lack of significant return differences by economic sectors around the previous quarter ends. does not detail these results for the sake of brevity, but they are available upon request.