REVIEW OF FINANCIAL STUDIES, Vol. 8 No. 4
Posted: 9 Jul 1998
This paper examines the contribution of stock price overreaction and delayed reaction to the profitability of contrarian strategies. The evidence indicates that stock prices overreact to firm-specific information but react with a delay to common factors. Delayed reactions to common factors give rise to size-related lead-lag effect in stock returns. In sharp contrast with the conclusions in the extant literature, however, this paper finds that most of the contrarian profit is due to stock price overreaction and a very small fraction of the profit can be attributed to the lead-lag effect.
JEL Classification: G19
Suggested Citation: Suggested Citation
Jegadeesh, Narasimhan and Titman, Sheridan, Overreaction, Delayed Reaction, and Contrarian Profits. REVIEW OF FINANCIAL STUDIES, Vol. 8 No. 4. Available at SSRN: https://ssrn.com/abstract=7224