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Strategies & Market Trends : January Effect 2007 -- Ignore unavailable to you. Want to Upgrade?

To: sammy™ -_- who wrote (28)	12/27/2006 4:50:16 PM
From: Q.	Read Replies (1) \| Respond to of 94

That story in Money Magazine re. January Effect is better than most such news stories, because it recognizes that the effect occurs mainly in thinly-traded tiny stocks with low prices, which is true. The researcher they quote goofs up, though, when he says this: Commissions, "spreads" (the gap between buying and selling prices) and a technicality called the "bid-ask bounce" add up so fast that it costs big bucks to trade small stocks. Loughran found that if you paid an absurdly low 12.5 cents a share, the average annual return of the January effect would drop by 8.9 percentage points. Here's why he's wrong: I'm trading for about 0.4% round trip commission, which isn't nearly as bad as the 8.9% he claims. The bid/ask spread is a real issue, but you can mitigate it by picking stocks that don't trade too thinly and be patient in waiting for small orders to execute.