The stock market has always been a great interest for both companies as well as individuals. This interest is based on the potential to achieve great profits. There are many possibilities to earn money in the stock market if one has the right information. It is always assumed that the stock market is efficient. This means that when an arbitrage possibility occurs it won’t be there for long, since brokers and individuals will use it. In this research a particular arbitrage occurrence will be investigated that has existed in the stock market for many years-The January Effect. This type of pattern in price behaviour on the financial market supports the fact that financial markets are not fully efficient. The January Effect was first observed in, or before, 1942 by investment banker Sidney B. Wachtel. It is the observed phenomenon that since 1925, small stocks have outperformed the broader market in the month of January, with most of the disparity occurring before the middle of the month. In this report, these existing claims and beliefs regarding the January Effect will be tested and analysed by evaluating the historical data of representative indices of the stock market.
