Winner‐Loser Reversals in National Stock Market Indices: Can They be Explained?

Richards, Anthony

doi:10.1111/j.1540-6261.1997.tb02755.x

Cited by 219 publications

(158 citation statements)

References 32 publications

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“…However, using the three-factor model makes the contrarian profits disappear indicating that this model fully explains these profits. Using index data of 16 countries, Richards (1997) showed that the excess returns of the loser portfolio do not reward taking an additional risk, as the latter is measured by the standard deviation of returns, the covariance with risk factors such as the world index and the exchange rate risk, or the performance of losers in various states of the world.…”

Section: The Rational Approachmentioning

confidence: 99%

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An Empirical Essay to Explain the Contrarian Profits in the Tunisian Stock Market: Behavioral Approach vs. Rational Approach

Boussaidi¹

2015

IJEF

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This paper aims to investigate the behavioral and the rational explanations for the contrarian profits in the Tunisian stock market. We use the CAPM and the three-factor model of French (1993, 1996) to examine the rational explanations including the market risk, the size effect and the book to market effect. Behavioral explanations include the overconfidence bias and the investor sentiment. We use the decomposition of the trading volume advanced by Chuang and Lee (2006) to extract the factor reflecting the investor overconfidence and the ARMS index to measure the investor sentiment. These two variables are included in the three-factor model of French (1993, 1996) in an attempt to confront the rational approach with the behavioral approach. The results indicate that the contrarian profits on the Tunisian stock market are explained by the market risk, the size effect and the Book to Market effect; and that once adjusted for these three risk factors, they disappear. However, only the factor reflecting overconfidence among the two behavioral factors seems to play a role in explaining these abnormal returns.

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Section: The Rational Approachmentioning

confidence: 99%

“…De Bondt & Thaler, 1985Richards, 1997;Balvers, Wu, & Gilliland, 2000, Chou, Chung, & Wei, 2007Akarim & Sevim, 2013), a negative return autocorrelation (e.g. Fama & French, 1988, Bali, Demirtas, & Levy, 2008Mukherji, 2011) and a cointegration relationship between the stock prices and their fundamental value (e.g.…”

Section: Introductionmentioning

confidence: 99%

An Empirical Essay to Explain the Contrarian Profits in the Tunisian Stock Market: Behavioral Approach vs. Rational Approach

Boussaidi¹

2015

IJEF

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“…A considerable number of other studies have essentially confirmed the prevalence of momentum effects in several segments of the international equity markets; examples include Rouwenhorst (1998;1999) for Europe and several emerging markets, as well as Chui et al (2003) for a number of Asian countries. For stock market indexes and exchange trade funds, rather than individual shares, significant momentum effects have been reported, inter alia, by Asness et al (1996); Richards (1997);Chan et al (2000) and Tse (2015) among others.…”

Section: Background and Literature Reviewmentioning

confidence: 97%

Yield Curve and Momentum Effects in Monthly U.S. Equity Returns: Some Nonparametric Evidence

Tyagi

Siddiqui²

2017

Asian Journal of Economics and Empirical Research

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In this paper, two largely familiar stock market anomalies -the yield curve and the momentum effects -are re-examined for the S&P 500 index by using nonparametric regression. The results essentially confirm the existence of both of these phenomena, but also indicate that the stochastic linkages between the explanatory variables and future index returns are nonlinear and mutually dependent. It hence turns out that the greater flexibility offered by nonparametric regression enables the detection and characterisation of some features of the underlying relationship that would have been gone unnoticed under the linearity and additivity assumptions underlying simpler regression approaches.

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“…The evidence of stock-level return reversal has been mirrored in market-level studies. Evidence that international equity market indices also exhibit long-term return reversal has been reported in a number of studies, including Richards (1997), Balvers, Wu and Gilliland (2000), and Malin and Bornholt (2013). An important difference between the results from market-level studies and those from stock-level studies is that popular asset-pricing models such as the Fama-French three-factor model are unable to explain the long-term reversal in international market indices.…”

Section: Related Literaturesmentioning

confidence: 99%

Evidence of Morocco Industry Long-Term Return Contrarian

Gharaibeh¹

2015

IJBM

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In a landmark paper, Bornholt, Gharaibeh, and Malin (2015) show strong evidence of contrarian in the long-term returns of U.S. industries over formation periods (up to 132 months), this paper investigates whether there is evidence of contrarian in the long-term returns of 17 Morocco industries using monthly data covering the period from January 1995 to April 2014. This study finds strong evidence of long-term return contrarian in industry returns from strategy with long formation period lengths of 108, 120 and 132 months and this finding confirms the Bornholt et al. (2015) finding. The finding of this paper suggests that industry-level return contrarian is not simply a reflection of the stock-level contrarian. These contrarians are difficult to reconcile with overreaction.

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Winner‐Loser Reversals in National Stock Market Indices: Can They be Explained?

Cited by 219 publications

References 32 publications

An Empirical Essay to Explain the Contrarian Profits in the Tunisian Stock Market: Behavioral Approach vs. Rational Approach

An Empirical Essay to Explain the Contrarian Profits in the Tunisian Stock Market: Behavioral Approach vs. Rational Approach

Yield Curve and Momentum Effects in Monthly U.S. Equity Returns: Some Nonparametric Evidence

Evidence of Morocco Industry Long-Term Return Contrarian

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