Quant: January effect portfolios
It is that time of year again when we publish our suggested OSEBX and OSEAX portfolios of stocks for investors looking to profit from the ‘January effect’ anomaly. The stocks are selected on a quantitative basis, identifying the weakest performers YTD, in line with the methodology outlined in academic research on the anomaly. The ‘January effect’ has been a remarkably reliable trading rule. In theory, well-known market anomalies should be arbitraged away over time, but that has not been the case with the January effect in Norway, at least so far. While there are various approaches to capitalising on the January effect, our methodology aims to replicate the strategy academic literature has found to be most reliable by selecting the 10 weakest performers YTD on a quantitative basis. This has provided positive returns in 20 of the past 22 years. Our back-testing has found that the optimal period for this strategy is from the middle of December until the fifth trading day in January (6 January 2023).
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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