Average stock returns for small, low stock price firms are higher in January than for the rest of the year. Two explanations have received a great deal of attention: tax-loss selling and gamesmanship. This paper documents that seasonality in returns is not a phenomenon observed only for small firms' stock or those with low prices. Strong seasonality in excess returns is reported for a sample of widely followed firms. Sample firms have unusually "low" excess returns in January and returns adjust upward over the year. These results are consistent with the gamesmanship hypothesis, but not the tax-loss-selling hypothesis. Copyright Blackwell Publishers Ltd 2000.
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