Hot and Cold Strategies: Australian Evidence

Ramiah, Vikash; Mugwagwa, Tafadzwa; Naughton, Tony

doi:10.1142/s0219091511002251

Cited by 7 publications

(3 citation statements)

References 59 publications

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“…These results support the findings of Ramiah et al. () and Lee et al. () which show that contrarian profits are lower after adjusting for short‐selling restrictions.…”

Section: Resultssupporting

confidence: 91%

“…() and Ramiah et al. (), but they are consistent with Bettman et al. () who find that short‐selling restrictions have a positive effect on equity contrarian profits.…”

Section: Resultssupporting

confidence: 79%

“…Ramiah et al. () demonstrate that the return on a contrarian strategy falls by 1.87% per day when short‐selling restrictions are present. This is a significant reduction in an investor's return, given that a contrarian portfolio with no short‐selling restrictions can earn 6.47% per day.…”

Section: Introductionmentioning

confidence: 99%

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The Profitability of Option‐Based Contrarian Strategies: An Empirical Analysis

2015

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Short‐selling restrictions limit investors' opportunities to profit from contrarian strategies in equity markets. We examine the proposition that incorporating options into contrarian strategies constitute a viable alternative to investors when short‐selling restrictions are in place. In particular, we combine equities with the call and put options traded on the Australian Stock Exchange to investigate the profitability of contrarian strategies in the hybrid market and options market alone. We assess the practical issues in the execution of these approaches, including testing for the effects of limited liquidity and transaction costs. We also investigate how fundamental factors (such as dividend yield, firm size, book‐to‐market ratio, earnings per share, price‐earnings ratio, value stocks, and market conditions) affect contrarian portfolios. The results show that employing options can enhance the profitability of contrarian strategies under certain market conditions.

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“…These results support the findings of Ramiah et al. () and Lee et al. () which show that contrarian profits are lower after adjusting for short‐selling restrictions.…”

Section: Resultssupporting

confidence: 91%

“…() and Ramiah et al. (), but they are consistent with Bettman et al. () who find that short‐selling restrictions have a positive effect on equity contrarian profits.…”

Section: Resultssupporting

confidence: 79%