The January Effect and the Relationships between Stock Returns, Market Beta, Firm Size, and Book-to-Market

Using Taiwan’s equity data, we test whether stock return seasonality affects the explanatory powers of market beta, firm size, and book-to-market on the cross-section of stock returns. We find that market beta, firm size, and book-to-market equity ratio fail to explain cross-sectional stock returns for the all-months sample. Further, while stock returns are positively related to beta and negatively related to firm size in the January month, they are still unrelated to beta, size, and book-to-market in the non-January month. Overall, we find that the beta-risk premium and the negative size-return relation exist a January effect, whereas the value premium is nonexistent.

Keywords: Market beta; Firm size; Market-to-book equity; The January effect.
JEL Classification: G12, G14.