The January effect for individual corporate bonds

•Findings based on individual instead of indexes of corporate bonds•Five-factor model appropriately prices individual corporate bond returns•Significant positive abnormal returns found in January•Reversals & tax-loss selling effects are important abnormal return determinants•Models allow for thin trading and different factor sensitivities in January

We examine the presence, magnitude and determinants of a January effect for individual corporate bonds. Our results provide empirical evidence of positive and statistically (but not economically) significant abnormal returns in January across different event windows and models. Our results suggest that, in the addition to the term and default factors, the excess stock returns, size and book-to-market factors are priced for individual bond returns. We investigate a number of determinants of the January abnormal returns for individual bonds. Our findings suggest that the reversal and tax-loss selling effects are important determinants of the abnormal returns on individual bonds.