Risk-Adjusted Long-Term Contrarian Profits: Evidence from Non-S&P 500 High Volume Stocks

Posted: 23 May 2005

See all articles by Udomsak Wongchoti

Udomsak Wongchoti

Massey University - School of Economics and Finance

Chong Soo Pyun

University of Memphis

Abstract

Can trading volume help unravel the long-term overreaction puzzle? With portfolios of non-S&P 500 NYSE stocks, we show that (a) both the high- and low-volume (abnormal volume) contrarian portfolios earn a much higher market-adjusted excess return than the normal-volume contrarian ortfolio, (b) however, when leverage-induced risk is factored in, excess returns from contrarian portfolios with normal and low-volume stocks are insignificant, (c) only excess returns from high-volume contrarian stocks are significant and cannot be explained away by the time-varying risk and return framework, and (d) such highvolume, risk-adjusted excess returns arise mainly from winner (glamour) stocks.

Keywords: Stock-market anomalies, contrarian portfolios, winner-loser investment strategy, return

JEL Classification: G11, G14, G19

Suggested Citation

Wongchoti, Udomsak and Pyun, Chong Soo, Risk-Adjusted Long-Term Contrarian Profits: Evidence from Non-S&P 500 High Volume Stocks. Financial Review, Vol. 40, No. 3, August 2005. Available at SSRN: https://ssrn.com/abstract=727327

Udomsak Wongchoti

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Chong Soo Pyun (Contact Author)

University of Memphis ( email )

Memphis, TN 38152
Memphis, TN usa 38152-3370
United States

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