Portfolio Selection with Contrarian Strategy

25 Pages Posted: 30 Jun 2020

Date Written: June 7, 2020

Abstract

Compared with extensive empirical literature on contrarian strategy, we build a dynamic mean-variance model with geometric mean reversion stock price which implies a contrarian strategy. Our model suggests that the investor should buy distressed stocks, and sell them after the company recovers. Simulation and empirical test demonstrate that our model often yields a significant return in a volatile market.

Keywords: portfolio selection;contrarian strategy; geometric mean reversion process; mean variance

JEL Classification: G11; D81;C61

Suggested Citation

Xu, Yuhong, Portfolio Selection with Contrarian Strategy (June 7, 2020). Available at SSRN: https://ssrn.com/abstract=3621369 or http://dx.doi.org/10.2139/ssrn.3621369

Yuhong Xu (Contact Author)

Soochow university ( email )

No. 1 Shizi Street
Suzhou, Jiangsu 215006
China

HOME PAGE: http://web.suda.edu.cn/yhxu/

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