The Small-Firm-in-January Effect. Shortly after the P/E factor was studied, economists discovered the “January effect” mentioned earlier: a clear tendency of the market to rally every January. Then, a “small-firm effect” was discovered: Portfolios of small-company stocks outperformed large companies by 4.3 percent, economists found. And, further study found, a “small-firm-in-January” effect combining the two phenomena was even more pronounced than either on its own.
