The January effect is one of the most intensive anomalies detected on stock markets. However, there is no unanimity about its causes. In this study, we check its persistence on the Spanish stock market and search for an explanation based on investor behaviour. Employing an alternative measure of the potential for tax-loss selling, we analyze the impact of tax-induced trading on stock returns and volume. Finally, we offer a complementary explanation based on window-dressing strategies carried out by institutional investors.

Key words: Asset Pricing, Anomalies, Potential for tax-loss selling.
JEL classification: G10, G12, G14.