A re-entry theory for abnormal behavior of financial markets in January is derived and tested. The model predicts that, by optimally shifting portfolios to mimic a benchmark, successful investment managers lock in superior performance, while unsuccessful investment managers lock out possible...

This paper tests a theoretical model of the basis and open interest of stock index futures. The model is based on the differences between stock and futures in terms of investors' ability to customize stock portfolios and liquidity. Empirical evidence confirms the model's prediction that...