The January Effect does not always occur, and no one knows why, despite several possible explanations. Many analysts believe that the December selling is of losing positions in order to claim capital losses for the calendar year. Another possible cause of January effect is caused by people receiving year-end bonuses in January and investing them in the market or by employees making end-of-year contributions to pension plans.
The J-curve effect refers to a time-series graph in which the curve descends into negative territory and then gradually rising to a higher level than before the decline. Under a given set of assumptions, the J-curve is the time path of a country’s trade balance following a devaluation or depreciation of its currency. A devalued currency makes imports more expensive, and this causes a fall in the current account if the volumes of imports and exports change little at first. However, after a while, the volume of exports begins to rise due to lower prices to foreign buyers, and domestic consumers buy fewer imports, which have become more expensive to them. The trade balance eventually shifts to a smaller deficit or larger surplus than it was before the devaluation. Similarly, if there is a currency revaluation or appreciation, the same logic can be applied, resulting in an inverted J curve.