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Short-term contrarian strategies in the London Stock Exchange: Are they profitable? Which factors affect them?

Antoniou, A.; Galariotis, E.C.; Spyrou, S.I.

Authors

A. Antoniou

E.C. Galariotis

S.I. Spyrou



Abstract

This paper provides evidence on short-term contrarian profits and their sources for the London Stock Exchange. Profits are decomposed to sources due to factors derived from the Fama and French (1996) three-factor model. For the empirical testing, size-sorted sub-samples are used, and adjustments for infrequent trading and bid-ask biases are also made. Results indicate that UK short-term contrarian strategies are profitable and more pronounced for extreme market capitalization stocks. These profits persist even when the sample is adjusted for market frictions, risk, seasonality, and irrespective of whether equally-weighted or value-weighted portfolios are employed. The most important factor that drives contrarian profits appears to be investor overreaction to firm-specific information.

Citation

Antoniou, A., Galariotis, E., & Spyrou, S. (2006). Short-term contrarian strategies in the London Stock Exchange: Are they profitable? Which factors affect them?. Journal of Business Finance and Accounting, 33(5-6), 839-867. https://doi.org/10.1111/j.1468-5957.2006.00003.x

Journal Article Type Article
Publication Date 2006-06
Deposit Date Aug 19, 2008
Journal Journal of Business Finance and Accounting
Print ISSN 0306-686X
Electronic ISSN 1468-5957
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 33
Issue 5-6
Pages 839-867
DOI https://doi.org/10.1111/j.1468-5957.2006.00003.x
Keywords Overreaction, Delayed reaction, Contrarian profits, Multi-factor models.
Public URL https://durham-repository.worktribe.com/output/1588114

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