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Using the well-known Fama-MacBeth methodology, this paper investigates the factors that may influence the cross-section of stock returns in the Dhaka Stock Exchange (DSE). Various combinations of factors such as dividend yield, size, price-earnings ratio, market return, spread between large and small firms, lagged values of factors, illiquidity of stocks, and cross-sectional volatility of the market are considered. However, results show that these factors hardly explain the cross-section of stock returns. Only market returns weakly explain stock returns. Interestingly, the relationship between market returns and stock returns has been consistently found to be negative, which contradicts the established notion of positive risk-return relationship. Even after considering for the effects of size, liquidity, and sub-periods, results do not change much

This article, using weekly data for the period 2002 through 2013, investigates the presence of both contrarian and momentum profits and their sources in the Bangladesh stock market. It follows the methodology of Lo and MacKinlay ( Review of Financial Studies, 1990, 3(2), 175–205) to form portfolios with a weighted relative strength scheme (WRSS). The methodology of Jegadeesh and Titman ( Review of Financial Studies, 1995, 8(4), 973–993) is used to decompose the contrarian/momentum profits into three elements: compensation for cross-sectional risk, lead–lag effect in time series with respect to the common factor and the time-series pattern of stock returns. Results provide the evidence of significant contrarian profits for the holding period of one through eight weeks. There is a stronger presence of contrarian profits during 2002–2008 sub-period. The time-series pattern is found to be the main source of contrarian profits, suggesting that idiosyncratic (firm-specific) information is the main contributor to contrarian profits. Interestingly, the influence of idiosyncratic information on such profits has gradually decreased since 2008. Contrarian profits are robust to market sentiment and other systematic risk factors.

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