Do Low‐Priced Stocks Drive Long‐Term Contrarian Performance on the London Stock Exchange?
Queen's University Belfast
Queen's University Belfast - School of Management
Ulster Business School
Financial Review, Vol. 47, Issue 3, pp. 501-530, 2012
We investigate whether low‐priced stocks drive long‐term contrarian performance on the U.K. market. We find that contrarian performance at low, middle, and high price levels is positive. On the Fama‐French risk adjusted basis, we find both low‐priced and middle‐priced losers have significantly positive returns. When we adjust returns by market and liquidity risk, only middle‐priced losers maintain their positive returns. Our results reveal that low‐priced stocks are not fully responsible for contrarian performance. Our empirical evidence is generally consistent with the overreaction hypothesis and behavioral models of value investing.
Number of Pages in PDF File: 30
Keywords: contrarian performance, London Stock Exchange, price level
JEL Classification: G12, G14Accepted Paper Series
Date posted: July 7, 2012
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