Turn of the Year Effect Law and Legal Definition

Turn of the year effect is a theory stating that the movement of the Standard & Poor's 500 Index (S&P 500) during the month of January sets the stock market's direction for the year. Under this theory, the stock market will finish the year higher if the S & P closes higher at the end of January. Likewise, if the S & P closes lower at the end of January, the stock market will have a bad year.