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Paper Stats:
Abstract Views: 5323
Downloads: 1681
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Behavior Of Momentum Following And Contrarian Market Timers
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ALOK KUMAR
University of Texas at Austin
January 1999
EFA 2001 Barcelona Meetings; Yale ICF Working Paper No. 99-01
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Abstract:
I analyze the behavior of a group of investment newsletters that provide explicit recommendations about the fractions of investment holding that should be allocated to risky and riskless asset classes. I find that the group of newsletters exhibit few types of simple behaviors and a majority of them can be classified as either momentum follower or contrarian. My analysis also shows that portfolios recommended by both momentum following and contrarian newsletters are capable of outperforming a fully invested benchmark portfolio. The newsletter recommended portfolios have positive Sharpe ratios, lower beta with respect to the market and a positive Jensen's alpha. Overall, these results indicate that by using simple trading strategies and proper timing, some newsletters are able to exhibit superior performance. The results also provide empirical support for models that posit feedback based investor behavior and provide a useful parametrization for researchers modeling investor behavior.
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JEL Classifications: G11, G14
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Working Paper Series
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Suggested Citation
Kumar, Alok, "Behavior Of Momentum Following And Contrarian Market Timers"
(January 1999).
EFA 2001 Barcelona Meetings; Yale ICF Working Paper No. 99-01. Available at SSRN: http://ssrn.com/abstract=146048
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Contact Information for
ALOK
KUMAR
(Contact Author)
Email address for ALOK
KUMAR
University of Texas at Austin
Red McCombs School of Business
1 University Station, B6600
Austin
, TX
78712
United States
512-232-6824 (Phone)
512-471-5073 (Fax)
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