Long-Term Return Reversal: Evidence from International Market Indices

32 Pages Posted: 1 Aug 2012 Last revised: 27 Feb 2013

See all articles by Mirela Malin

Mirela Malin

Griffith University - Department of Accounting, Finance and Economics

Graham N. Bornholt

Griffith University - Department of Accounting, Finance and Economics

Date Written: August 1, 2012

Abstract

This paper documents evidence of reversals in the long-term returns of international equity markets. We use recent short-term performance to better select contrarian securities that appear ready to reverse. Our late-stage contrarian strategy consistently provides stronger evidence of long-term return reversal than does the traditional pure contrarian strategy when applied to developed and emerging market indices. Despite an absence of cross-sectional contrarian profits for developed markets in our post-1989 subsample, longitudinal analysis provides strong evidence of reversals during this period. Overall, our results suggest that the reversal of long-term returns may be stronger and more pervasive than is generally understood.

Keywords: contrarian effect, international financial integration, developed markets, emerging markets

JEL Classification: G14, G15

Suggested Citation

Malin, Mirela D. and Bornholt, Graham N., Long-Term Return Reversal: Evidence from International Market Indices (August 1, 2012). Available at SSRN: https://ssrn.com/abstract=2121150 or http://dx.doi.org/10.2139/ssrn.2121150

Mirela D. Malin (Contact Author)

Griffith University - Department of Accounting, Finance and Economics ( email )

Gold Coast Campus
Gold Coast, Queensland 4222
Australia
+61 7 5552 7719 (Phone)

Graham N. Bornholt

Griffith University - Department of Accounting, Finance and Economics ( email )

Gold Coast Campus
Gold Coast QLD, 4222
Australia

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