This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

When Are Contrarian Profits Due to Stock Market Overreaction?

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Lo, Andrew W
MacKinlay, A Craig

Additional information is available for the following registered author(s):

Abstract

If returns on some stocks systematically lead or lag those of others, a portfolio strategy that sells "winners" and buys "losers" can produce positive expected returns, even if no stock's returns are negatively autocorrelated as virtually all models of overreaction imply. Using a particular contrarian strategy, the authors show that, despite negative autocorrelation in individual stock returns, weekly portfolio returns are strongly positively autocorrelated and are the result of important cross-autocorrelations. The authors find that the returns of large stocks lead those of smaller stocks, and present evidence against overreaction as the only source of contrarian profits. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
File Format: application/pdf
File Function: full text
Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 3 (1990)
Issue (Month): 2 ()
Pages: 175-205
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:rfinst:v:3:y:1990:i:2:p:175-205

Contact details of provider:
Postal: Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.
Fax: 919-677-1714
Email:
Web page: http://www.rfs.oupjournals.org/
More information through EDIRC

Order Information:
Web: http://www4.oup.co.uk/revfin/subinfo/

For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).

Related research
Keywords:

Other versions of this item:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Summers, Lawrence H, 1986. " Does the Stock Market Rationally Reflect Fundamental Values?," Journal of Finance, American Finance Association, vol. 41(3), pages 591-601, July. [Downloadable!] (restricted)
  2. Atchison, Michael D & Butler, Kirt C & Simonds, Richard R, 1987. " Nonsynchronous Security Trading and Market Index Autocorrelation," Journal of Finance, American Finance Association, vol. 42(1), pages 111-18, March. [Downloadable!] (restricted)
  3. Phillips, P C B, 1987. "Time Series Regression with a Unit Root," Econometrica, Econometric Society, vol. 55(2), pages 277-301, March. [Downloadable!] (restricted)
    Other versions:
  4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May. [Downloadable!] (restricted)
  5. Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December. [Downloadable!] (restricted)
  6. Kim, M.J. & Nelson, C.R. & Startz, R., 1988. "Mean Reversion In Stock Prices? A Reappraisal Of Empirical Evidence," Working Papers 88-15, University of Washington, Department of Economics.
    Other versions:
  7. Fama, Eugene F & French, Kenneth R, 1988. "Permanent and Temporary Components of Stock Prices," Journal of Political Economy, University of Chicago Press, vol. 96(2), pages 246-73, April. [Downloadable!] (restricted)
  8. Roll, Richard, 1984. " A Simple Implicit Measure of the Effective Bid-Ask Spread in an Efficient Market," Journal of Finance, American Finance Association, vol. 39(4), pages 1127-39, September. [Downloadable!] (restricted)
  9. Andrew W. Lo, A. Craig MacKinlay, 1988. "Stock Market Prices do not Follow Random Walks: Evidence from a Simple Specification Test," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 1(1), pages 41-66. [Downloadable!] (restricted)
    Other versions:
  10. De Bondt, Werner F M & Thaler, Richard H, 1987. " Further Evidence on Investor Overreaction and Stock Market Seasonalit y," Journal of Finance, American Finance Association, vol. 42(3), pages 557-81, July. [Downloadable!] (restricted)
  11. J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989. "Positive Feedback Investment Strategies and Destabilizing Rational Speculation," NBER Working Papers 2880, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  12. De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.
Statistics
Access and download statistics

Did you know? You too can volunteer for RePEc, for example by editing a NEP report.

This page was last updated on 2009-10-23.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.