The January Effect in the Time of the Pandemic and the Post-Pandemic Economic Reality – Case of the Warsaw Stock Exchange
The January Effect in the Time of the Pandemic and the Post-Pandemic Economic Reality – Case of the Warsaw Stock Exchange

Summary/Abstract: Theoretical background: One of the market anomalies is the so-called "January effect", which involves mass purchases of securities triggered by replenishing investment portfolios at the beginning of the calendar year. The January effect is associated with the end-of-year sale of securities whose valuations brought a loss to investors. In the new year, investors re-purchase securities that they consider undervalued (which were sold at the end of the year). More recently, studies into this group of anomalies (including the January effect) can be seen to undertake consideration of their occurrence from the point of view of the impact of the COVID-19 pandemic and the post-pandemic economic reality. In these years have seen periods of historically high readings of the market volatility. Situations of heightened uncertainty in the markets create motivations for scientific exploration that can be used to discover new correlations (or confirm existing ones) taking place in global capital markets. Purpose of the article: The aim of the paper is to verify the occurrence of one of the most common market anomalies, the January effect, in the time of the pandemic and the post-pandemic economic reality (2020–2024). During this time, markets faced two "black swans" in the form of the COVID-19 pandemic and the outbreak of war in Ukraine. This period was characterized by increased uncertainty (volatility), which could be noted, for example, by analysing the readings of the VIX index ("CBOE volatility index"). Research methods: Based on the event study and the index of the measure of implied price volatility (VIX index), the January effect was verified in the time of the pandemic and the post-pandemic economic reality. The study was conducted on a group of 18 indices of the main market of the WSE (WIG20, mWIG40, sWIG80, sector indices, WIG-DIV, WIG-ESG). Main findings: The study found that above-average volatility was recorded in the month of January in the years 2020–2022. However, the January effect occurred in only one of these years (2021). In the remaining years (2020 and 2022), no statistical significance in the calculated average abnormal returns was recorded. Moreover, in 2022 these returns were negative, which is in contrast to previous observations made as part of the January effect. Thanks to the research results, certain implications can be drawn for participants of the WSE. Based on the presented sample of 18 indices, it can be seen that the calendar anomalies described earlier do not necessarily have to apply in periods of above-average uncertainty. Therefore, it is necessary to encourage investors to be careful when investing their funds on the WSE and other capital markets.

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