IDEAS home Printed from https://ideas.repec.org/a/taf/apfiec/v14y2004i14p1027-1034.html
   My bibliography  Save this article

Sources of contrarian profits and return predictability in emerging markets

Author

Listed:
  • Emilios Galariotis

Abstract

Acknowledging a gap in the literature, the study performs an investigation on short-term contrarian profits and their sources for the Athens Stock Exchange (ASE). The methodology is based on Jegadeesh and Titman (Review of Financial Studies, 8, 973-93, 1995); however, this paper employs annually rebalanced size-sorted subsamples instead of a one-off arrangement throughout the sample period. Other key contributions relate to: (a) testing the effect on the empirical results of the choice of an equally as opposed to a value weighted index as a proxy for the market portfolio, and (b) testing for the January effect following the ongoing discussion and disagreement in the literature on seasonality. Empirical findings suggest that short-run contrarian profits are present in the ASE. Furthermore, although both underreaction to common factors and overreaction to the firm-specific return component, appear to contribute to profits; the contribution of overreaction is much larger than that of underreaction. Not only so, but any contribution of the later is restricted to the month of January. Seasonality however has no effect on firm specific overreaction. The selection of a value weighted or an equally weighted index does not alter the main findings, and thus does not explain predictability for this market.

Suggested Citation

  • Emilios Galariotis, 2004. "Sources of contrarian profits and return predictability in emerging markets," Applied Financial Economics, Taylor & Francis Journals, vol. 14(14), pages 1027-1034.
    • Handle: RePEc:taf:apfiec:v:14:y:2004:i:14:p:1027-1034
    DOI: 10.1080/0960310042000261802
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/0960310042000261802
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/0960310042000261802?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Schwert, G. William, 2003. "Anomalies and market efficiency," Handbook of the Economics of Finance, in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 15, pages 939-974, Elsevier.
    2. Antonios Antoniou & Emilios C. Galariotis & Spyros I. Spyrou, 2005. "Contrarian Profits and the Overreaction Hypothesis: the Case of the Athens Stock Exchange," European Financial Management, European Financial Management Association, vol. 11(1), pages 71-98, January.
    3. Michaely, Roni & Thaler, Richard H & Womack, Kent L, 1995. "Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?," Journal of Finance, American Finance Association, vol. 50(2), pages 573-608, June.
    4. Lo, Andrew W & MacKinlay, A Craig, 1990. "When Are Contrarian Profits Due to Stock Market Overreaction?," The Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 175-205.
    5. Poterba, James M. & Summers, Lawrence H., 1988. "Mean reversion in stock prices : Evidence and Implications," Journal of Financial Economics, Elsevier, vol. 22(1), pages 27-59, October.
    6. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Walid Saleh, 2007. "Overreaction: the sensitivity of defining the duration of the formation period," Applied Financial Economics, Taylor & Francis Journals, vol. 17(1), pages 45-61.
    2. Luis Muga & Rafael Santamaria, 2007. "The stock market crisis and momentum. Some evidence for the Spanish stock market during the 1990s," Applied Financial Economics, Taylor & Francis Journals, vol. 17(6), pages 469-486.
    3. Galariotis, Emilios C. & Holmes, Phil & Ma, Xiaodong S., 2007. "Contrarian and momentum profitability revisited: Evidence from the London Stock Exchange 1964-2005," Journal of Multinational Financial Management, Elsevier, vol. 17(5), pages 432-447, December.
    4. Antonios Antoniou & Emilios C. C Galariotis & Spyros I. Spyrou, 2006. "The effect of time-varying risk on the profitability of contrarian investment strategies in a thinly traded market: a Kalman filter approach," Post-Print hal-01096031, HAL.
    5. Betty Agnani & Henry Aray, 2011. "The January effect across volatility regimes," Quantitative Finance, Taylor & Francis Journals, vol. 11(6), pages 947-953.
    6. Christos Alexakis & Theophano Patra & Sunil Poshakwale, 2010. "Predictability of stock returns using financial statement information: evidence on semi-strong efficiency of emerging Greek stock market," Applied Financial Economics, Taylor & Francis Journals, vol. 20(16), pages 1321-1326.
    7. A. Assaf, 2007. "Fractional integration in the equity markets of MENA region," Applied Financial Economics, Taylor & Francis Journals, vol. 17(9), pages 709-723.
    8. Dimitrios Kyriazis & Chris Christou, 2013. "A Re-examination of the Performance of Value Strategies in the Athens Stock Exchange," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 19(2), pages 131-151, May.
    9. Sandrine Jacob Leal, 2015. "Fundamentalists, Chartists and Asset pricing anomalies," Post-Print hal-01508002, HAL.
    10. Mark Schaub, 2006. "Investor overreaction to going concern audit opinion announcements," Applied Financial Economics, Taylor & Francis Journals, vol. 16(16), pages 1163-1170.
    11. Sandrine Jacob Leal, 2015. "Fundamentalists, chartists and asset pricing anomalies," Quantitative Finance, Taylor & Francis Journals, vol. 15(11), pages 1837-1850, November.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Achim Himmelmann & Dirk Schiereck & Marc Simpson & Moritz Zschoche, 2012. "Long-term reactions to large stock price declines and increases in the European stock market: a note on market efficiency," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 36(2), pages 400-423, April.
    2. Galariotis, Emilios C. & Holmes, Phil & Ma, Xiaodong S., 2007. "Contrarian and momentum profitability revisited: Evidence from the London Stock Exchange 1964-2005," Journal of Multinational Financial Management, Elsevier, vol. 17(5), pages 432-447, December.
    3. Nam, Kiseok & Pyun, Chong Soo & Kim, Sei-Wan, 2003. "Is asymmetric mean-reverting pattern in stock returns systematic? Evidence from Pacific-basin markets in the short-horizon," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(5), pages 481-502, December.
    4. Lo, Andrew W & Wang, Jiang, 1995. "Implementing Option Pricing Models When Asset Returns Are Predictable," Journal of Finance, American Finance Association, vol. 50(1), pages 87-129, March.
    5. Semenov, Andrei, 2021. "Measuring the stock's factor beta and identifying risk factors under market inefficiency," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 635-649.
    6. Li, Kai, 2021. "Nonlinear effect of sentiment on momentum," Journal of Economic Dynamics and Control, Elsevier, vol. 133(C).
    7. Asiya Sohail & Attiya Yasmin Javid, 2014. "The Global Financial Crisis and Investors’ Behaviour; Evidence from the Karachi Stock Exchange," PIDE-Working Papers 2014:106, Pakistan Institute of Development Economics.
    8. Trabelsi, Mohamed Ali, 2008. "Sur-réaction sur le marché tunisien des actions : une investigation empirique [Overreaction on the Tunisian stock market: an empirical test]," MPRA Paper 26751, University Library of Munich, Germany.
    9. Borgards, Oliver & Czudaj, Robert L., 2020. "The prevalence of price overreactions in the cryptocurrency market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 65(C).
    10. An-Sing Chen & Che-Ming Yang, 2021. "Optimal statistical arbitrage trading of Berkshire Hathaway stock and its replicating portfolio," PLOS ONE, Public Library of Science, vol. 16(1), pages 1-22, January.
    11. Antonios Antoniou & Emilios C. C Galariotis & Spyros I. Spyrou, 2006. "The effect of time-varying risk on the profitability of contrarian investment strategies in a thinly traded market: a Kalman filter approach," Post-Print hal-01096031, HAL.
    12. Michael Brennan & Feifei Li & Walter Torous, 2005. "Dollar Cost Averaging," Review of Finance, Springer, vol. 9(4), pages 509-535, December.
    13. Ramiah, Vikash & Xu, Xiaoming & Moosa, Imad A., 2015. "Neoclassical finance, behavioral finance and noise traders: A review and assessment of the literature," International Review of Financial Analysis, Elsevier, vol. 41(C), pages 89-100.
    14. Trabelsi, Mohamed Ali, 2008. "Sur-réaction sur le marché tunisien des actions : une investigation empirique [Overreaction on the Tunisian stock market: an empirical test]," MPRA Paper 76925, University Library of Munich, Germany.
    15. Balvers, Ronald J. & Wu, Yangru, 2006. "Momentum and mean reversion across national equity markets," Journal of Empirical Finance, Elsevier, vol. 13(1), pages 24-48, January.
    16. Houda Ben Mhenni Haj Youssef & Lassad El Moubarki & Olfa Benouda Sioud, 2010. "Can diversification degree amplify momentum and contrarian anomalies?," Review of Accounting and Finance, Emerald Group Publishing Limited, vol. 9(1), pages 50-64, February.
    17. Juncal Cunado & Luis A. Gil-Alana & Fernando Pérez de Gracia, 2002. "Is the US Fiscal Deficit Sustainable? A Fractionally Integrated and Cointegrated Approach," Faculty Working Papers 02/02, School of Economics and Business Administration, University of Navarra.
    18. Gencay, Ramazan, 1998. "The predictability of security returns with simple technical trading rules," Journal of Empirical Finance, Elsevier, vol. 5(4), pages 347-359, October.
    19. Minye Zhang & Yongheng Deng, 2010. "Is the Mean Return of Hotel Real Estate Stocks Apt to Overreact to Past Performance?," The Journal of Real Estate Finance and Economics, Springer, vol. 40(4), pages 497-543, May.
    20. Antonios Antoniou & Emilios C. Galariotis & Spyros I. Spyrou, 2006. "Short‐term Contrarian Strategies in the London Stock Exchange: Are They Profitable? Which Factors Affect Them?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(5‐6), pages 839-867, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:14:y:2004:i:14:p:1027-1034. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAFE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.