SEASONALITIES IN NYSE BID-ASK SPREADS AND STOCK RETURNS IN JANUARY

Using end-of-month bid-ask spreads for 540 NYSE stocks over the period 1982-1987, we document a seasonal pattern in which both relative and absolute spreads decline from the end of December to the end of the following January. Cross-sectional regressions do not, however, provide evidence of a significant correlation between changes in spreads at the turn of the year and January stock returns. Either there is no cause and effect relation between the coincidental seasonals in bid-ask spreads and January returns for NYSE stocks or the data are too ''noisy'' to reveal any relation.