The "January effect" is a seasonal phenomenon in the stock market where stock prices tend to rise in January, particularly for small-cap stocks. This trend is often attributed to year-end tax-loss selling, where investors sell off losing stocks in December to offset taxes, leading to increased buying in January. Investors may also reinvest their year-end bonuses or new funds at the beginning of the year, contributing to the price increase. While the January effect has been observed historically, its consistency and significance can vary, and not all years exhibit this pattern.