What is the Capricorn effect?
Capricorn astrology is from 22nd December to 19th January.
According to Wikipedia, the Capricorn effect refers to the month of January where stock prices tend to increase more than other months of the year. It is only a hypothesis.
The effect was observed by Sidney B. Wachtel who was an investment banker.
Rationale behind the hypothesis
- Individual investors, who are income tax sensitive and sell stocks for tax reasons at year end and reinvest at the beginning of the year. This does not seem to apply to Singapore stock market as dividends and profit gain from stocks are not taxable.
- Payment of Annual Wage Supplement in December and for some companies paying out bonus in January.