The Turn-of-the-Year Effect and Tax-Loss-Selling by Institutional Investors
Bibliographic record
Abstract
Prior studies attribute the turn-of-the-year effect whereby small capitalization stocks earn unusually high returns in early January to tax-loss-selling by individual investors and window-dressing by institutional investors. My results suggest that a significant portion of the effect on turn-of-the-year returns that prior studies attribute to window-dressing is actually attributable to tax-loss-selling by institutional investors. Among small capitalization stocks, I find that institutional investors with strong tax incentives and weak window-dressing incentives realize significantly more losses in the fourth quarter than in the first three quarters of the calendar year, and that their fourth quarter realized losses have a significant impact on turn-of-the-year returns. A one percentage point change in these institutional investors' fourth quarter realized losses scaled by a firm's market capitalization results in an increase of 47 basis points in the firm's average daily return over the first three trading days of January, which represents a 46 percent change for the mean firm.
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.002 | 0.010 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.001 |
| Bibliometrics | 0.001 | 0.001 |
| Science and technology studies | 0.000 | 0.001 |
| Scholarly communication | 0.001 | 0.001 |
| Open science | 0.000 | 0.001 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.007 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".