Portfolio managers exhibit herd mentality. They are safe when their portfolios look pretty much like everyone who invests with the same mandate, as no one loses his or her job because of average performance or holding the same securities as the rest of the peer group.
Such seasonal behaviour is difficult for the markets to fully eliminate for two reasons. First, it is related to window dressing and/or remuneration-motivated turn-of-the-year portfolio rebalancing by professional portfolio managers who pursue their own interest year-in and year-out. Second, seasonality is not consistently observed every year.
Table 1 can help us understand what happened over the last few months. It shows the return and volume to shares for the worst performing stocks in S&P 500 and Nasdaq for three periods: March to October 2022 , November to December 2022 and January 2023. Both indices experienced sharp losses between March and October 2022, especially Nasdaq. Average volume to shares outstanding were 1.6% for S&P 500 and 10.5% for Nasdaq.