The January Effect is a famous market anomaly.
The January Effect was first noticed by Sidney Wachtel, who was an investment banker, in 1942. Looking at data from 1925 onwards, he saw that small-cap stocks had outperformed the market in most Januaries. Beginning from 1928, the S&P500 experienced a positive development in January in 56 years out of 91.
The January Effect refers to a pattern exhibited by stocks -- particularly small-cap stocks -- in which they've shown a tendency to rise during the last several trading days in December and then continue to rally throughout the first week of January.
In this example, our investor’s taxable investment income would be $8,000. They would have made $15,000 from the first two investments, but they could write off the losses from Company C.