Skip to main content

Research Repository

Advanced Search

Sources of contrarian profits and return predictability in emerging markets

Galariotis, E.C.

Authors

E.C. 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.

Journal Article Type Article
Publication Date Oct 1, 2004
Deposit Date Apr 2, 2007
Journal Applied Financial Economics
Print ISSN 0960-3107
Electronic ISSN 1466-4305
Publisher Routledge
Peer Reviewed Peer Reviewed
Volume 14
Issue 14
Pages 1027-1034
DOI https://doi.org/10.1080/0960310042000261802
Public URL https://durham-repository.worktribe.com/output/1601109