Short-Term Contrarian Strategies in the London Stock Exchange: Are They Profitable? Which Factors Affect Them?

29 Pages Posted: 13 Aug 2006

See all articles by Antonios Antoniou

Antonios Antoniou

Wealth Associates

Emilios C. Galariotis

Audencia Business School

Spyros I. Spyrou

Athens University of Economics and Business - Department of Accounting and Finance

Abstract

This paper provides evidence on short-term contrarian profits and their sources for the London Stock Exchange. Profits are decomposed to sources due to factors derived from the Fama and French (1996) three-factor model. For the empirical testing, size-sorted sub-samples are used, and adjustments for infrequent trading and bid-ask biases are also made. Results indicate that UK short-term contrarian strategies are profitable and more pronounced for extreme market capitalization stocks. These profits persist even when the sample is adjusted for market frictions, risk, seasonality, and irrespective of whether equally-weighted or value-weighted portfolios are employed. The most important factor that drives contrarian profits appears to be investor overreaction to firm-specific information.

Suggested Citation

Antoniou, Antonios and Galariotis, Emilios C. and Spyrou, Spyros I., Short-Term Contrarian Strategies in the London Stock Exchange: Are They Profitable? Which Factors Affect Them?. Journal of Business Finance & Accounting, Vol. 33, No. 5-6, pp. 839-867, June/July 2006. Available at SSRN: https://ssrn.com/abstract=924039 or http://dx.doi.org/10.1111/j.1468-5957.2006.00003.x

Antonios Antoniou

Wealth Associates ( email )

Alpine House,
Honeypot Lane
London, NW9 9RX
United Kingdom

Emilios C. Galariotis (Contact Author)

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

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

Spyros I. Spyrou

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

Register to save articles to
your library

Register

Paper statistics

Downloads
18
Abstract Views
988
PlumX Metrics