Contrarian Profits and the Overreaction Hypothesis: The Case of the Athens Stock Exchange
Posted: 13 May 2001
Date Written: undated
This paper investigates the existence of contrarian profits and the sources of these profits, for the Athens Stock Exchange (ASE). The empirical analysis decomposes contrarian profits to sources due to common factor reaction, overreaction to firm-specific information, and profits not related to the previous two terms, as suggested by Jegadesh and Titman (1995). Furthermore, the paper examines (i) size-sorted sub-samples that are rebalanced annually, and (ii) whether the results are due to the well-known January seasonal. The findings suggest that, when January returns are excluded, contrarian profits in the ASE are due more to firm specific overreaction than reaction to a common factor. This implies that the delayed reaction phenomenon in the ASE is restricted to January. This result is reinforced when we allow for time variations in factor sensitivities.
Keywords: Overreaction, delayed reaction, contrarian profits, emerging stock markets
JEL Classification: G1
Suggested Citation: Suggested Citation