Is the last quarter of the year and the first month of the new year a good time for investors to engage in some event-driven trading? The WSJ has a great article [subscription required] on how funds tend to drop their biggest losers by the end of October to enjoy the tax shield and acquire the year’s best performers before December 31st as a window dressing technique in order to impress investors.
According to the article, research shows that for the past six years if someone were to buy the years biggest losers at the end of October and were to sell them by the end of December, they would see gains that are larger than the S&P’s gains by 7% on average. Maybe I’ll conduct some research on my own during my free time to see how companies in the financial sector performed during this two month period, considering their huge decline in the past few months.
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