INSTITUTIONS AND INDIVIDUALS AT THE TURN-OF-THE-YEAR

This article evaluates the tax-loss-selling hypothesis against the win dow-dressing hypothesis as explanations for turn-of-the-year anomalies . We examine differences between securities dominated by individual in vestors versus those dominated by institutional investors and find tha t the effect is more pervasive in the former. Controlling for capitali zation, we find that in early January (late December), stocks with gre ater individual investor interest outperform (underperform) stocks wit h greater institutional investor interest. These results hold for both stocks that previously appreciated in value and stocks that previousl y depreciated in value. The results are most consistent with the tax-l oss-selling hypothesis as an explanation for the turn-of-the-year effe ct.