Recent Evidence on the Performance and Riskiness of Contrarian Portfolios

The European Journal of Finance Vol. 18, No. 7, August 2012, 603–617

Posted: 21 Jan 2016

See all articles by Emilios C. Galariotis

Emilios C. Galariotis

Audencia Business School ; Audencia Nantes School of Management

Date Written: August 1, 2012

Abstract

The paper assesses the most recent performance, persistence and riskiness of contrarian portfolios. Evidence from the major world and European market of France shows that such portfolios appear profitable on average, but their performance is not persistent from one holding period to the next; hence there exist inherent risks, especially for investors that remain in markets for up to two consecutive investment periods. These risks, as measured by the CAPM (traditional, and less traditional versions that are meant to capture timing) and the Fama–French model, are not systematic and they are not related to market timing. Overall, taking only long positions in normal markets and hedged positions following market shocks seems to be the most promising route for contrarians in France.

Keywords: overreaction, contrarian, market timing, CAPM, Fama–French three factor model, French security exchange

JEL Classification: G1, G10, G11, G14

Suggested Citation

Galariotis, Emilios C., Recent Evidence on the Performance and Riskiness of Contrarian Portfolios (August 1, 2012). The European Journal of Finance Vol. 18, No. 7, August 2012, 603–617, Available at SSRN: https://ssrn.com/abstract=2718272

Emilios C. Galariotis (Contact Author)

Audencia Business School ( email )

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BP 31222
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France

HOME PAGE: http://faculte-recherche.audencia.com/en/faculty/faculty-member-cvs/emilios-galariotis/

Audencia Nantes School of Management ( email )

France

HOME PAGE: http://faculte-recherche.audencia.com/en/faculty/faculty-member-cvs/emilios-galariotis/

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