The differences between time points

In the financial market, the performances at the end of year and the performance at the beginning of year are very different. At the end of year, the trading volume is relatively low. This is very understandable as there are fewer financial reports coming out and many workers go on holidays and it is a break time for people as well as the financial market. However, in January, it is generally believed that the returns in January are higher than the rest of year. This was not true in 2016 however. Sometimes, the strategies taken, especially in early January could be seen as irrational. Why time points could make a difference in financial markets without very specific information?

I think the period between the close of financial market at the end of year makes a huge impact. When people are frequently taking actions within the system, people could narrow their thoughts and focus on the projects they are doing. During their working time, they have a very tight time constraint that they have to focus on their own projects by giving up some attentions on the overall environment. In some extreme cases, the information they receive is also restricted as when they have a specific task, the less relevant information will be ignored. Once they go on a holiday, they have a lot more free time and they now have time to see the overall environment and receive more general information that might be helpful. Moreover, during holidays, they meet more people, who are not necessarily from their working system, they start to know some inside information, such as how much others' wages change, how long their working hours are, how they feel about their industries and what they think is their industries' major challenges. After receiving lots of new information and looking at the overall environment again, they now have different expectations about financial markets' performances in the next year, they could be more optimistic or more pessimistic. Then at the beginning of the new year, they will change their strategies according to their new expectations, this is why in January the trading could be relatively more active without adopting much information.