Overview of the January Effect

The "January effect" has been used to refer to the phenomenon in which small-cap securities often have had higher rates of return in past Januarys than large-cap stocks. The effect was first suggested in 1942, and widely publicized in the past 25 years by scholarly articles and a popular book entitled The Incredible January Effect: The Stock Market's Unsolved Mystery, by Robert A. Haugen and Josef Lakonishok. Perhaps due in part to publicity and anticipation of the effect, the January effect has weakened in recent years. There are a number of theories as to why the January effect has occurred. Some people speculate that it may be related to the many year-end research reports on the small-cap market, which can make these stocks look like attractive places to put money. Another theory says that investors who need cash for the holiday season will sell some holdings; bargain hunters then swoop in to buy the sold-off shares. Others believe the effect may be related to tax-motivated selling and buying -- fund managers might rush to buy back all those money-losing stocks they had previously sold to meet the tax-loss deadline. See the bibliography below for more details

http://www.cboe.com/Institutional/january.aspx

Just Google the January Effect. Lot more explanations out there.