Besides tax-loss harvesting and repurchases, and investors putting cash bonuses into the market, the January Effect is affected by investor psychology.

• Some investors feel that January is the best month to begin an investment program.
• Others think that mutual fund managers buy top performers' stocks at the end of the year and dispense questionable losers for appearance sake in the year-end reports.
• Year-end sell-offs attract buyers interested in the lower prices.

• A study analysing data between 1904 and 1974 revealed that the average return for stocks during January was five times higher than any other month, particularly in small-capitalisation stocks.
• Another study from 1972 to 2002 found that the Russell 2000 index stock outperformed stocks in the Russell 1000 index in January.
• The stocks outperformed by 0,82% and underperformed during the rest of the year.

But it is suggested that too many people now time for the January Effect so that it becomes priced into the market, levelling out the effect.