Price reversals in global equity markets

The objective of this article is to document the existence of significant excess returns for active strategies exploiting short-term reversals. While the previous literature has been mostly focused on individual stock returns, we investigate whether selling past weeks’ winners and buying past weeks’ losers would create ‘alpha’ in global equity markets. In other words, we test the outperformance of a self-financing market neutral long/short portfolio based on price reversals. We carefully investigate the robustness of our results resulting from non-overlapping trading times between global markets, transaction costs, as well as the importance of the day of the week for implementing a weekly reversal strategy. Finally, we apply modern data-snooping tests to eliminate the possibility that our results are the consequence of excessive data mining.