A plausible account of the turn-of-the-year effect is that holders of stocks that have fallen in price tend to sell them in December, before their tax year ends, in order to realize a tax loss that can be set against gains in other parts of their portfolios. The stocks then "jump back up" in January. The effect might be particularly strong for small stocks because of their typically high volatilities (Roll 1983, p. 20).

Donald MacKenzie, An Engine, Not a Camera, loc. 424