Momentum, Contrarian, and the January Seasonality

Yao, Yaqiong

doi:10.2139/ssrn.1663686

Cited by 21 publications

(19 citation statements)

References 26 publications

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“…However, momentum profits do not exist in the Malaysian stock market. This is inconsistent with the literature, which shows that momentum strategies work over intermediate horizons of three to 12 months (i.e., Jegadeesh & Titman 1993Foster & Kharazi 2008;Yao 2012;Doan, Alexeev & Brooks 2014). Instead, statistically significant contrarian profits arise for the Note: This table presents average monthly returns in percentages for contrarian and momentum strategies based on various f-month formation periods and h-month holding periods.…”

Section: Resultsmentioning

confidence: 72%

“…A growing body of literature has documented seasonal effects in reversal and momentum profits. For example, De Thaler (1985, 1987), Jegadeesh (1990), Zarowin (1990) and Yao (2012) document that contrarian returns are concentrated in January in the US market. Jegadeesh andTitman (1993, 2001) also report that large momentum profits are concentrated in November and December, while contrarian profits occur in January.…”

Section: Introductionmentioning

confidence: 99%

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Size, Seasonality, Market States and Contrarian Profits

Kew

Tee

2018

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The study investigates the profitability of contrarian and momentum strategies for short, intermediate and long investment horizons in the Malaysian stock market from 1990-2016. Unlike developed markets, the findings reveal that momentum strategies do not generate profits in Malaysia. Rather, contrarian strategies realise significant returns over short, intermediate and long investment horizons. Contrarian profits are most pronounced among medium-and smallcapitalisation stocks. Moreover, the previously documented February/Chinese New Year effect is evident in contrarian profits. Further, market states are important determinants of contrarian profits. Specifically, contrarian returns are greater following market downturns than market upturns. The findings provide important implications for investors who are considering momentum and contrarian strategies as potential investments.

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Section: Resultsmentioning

confidence: 72%

Section: Introductionmentioning

confidence: 99%

Size, Seasonality, Market States and Contrarian Profits

Kew

Tee

2018

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“…Studies on specific industrial sectors unveil that the momentum and contrarian effects can obtain much more profits in industrial sectors [21,22]. Note that the results about the momentum and contrarian effects vary with changing market states [23] and seasonality [24]. There are also studies on individual stocks and stock market indexes [25], which is beyond the scope of this work.…”

Section: Introductionmentioning

confidence: 92%

“…The best performance is achieved if one ranks the stocks according to their profits in the past four years and holds the loser portfolio for two years (SZSE) or longer (SHSE). The highest annualized return is 36.2% for the LOS(48, 36) portfolio on the SHSE and 36.9% for the LOS (48,24) and LOS(42, 30) portfolios on the SZSE.…”

Section: The Case Of Varying J and Kmentioning

confidence: 98%

“…Panel A shows the results for contrarian portfolios based on decile grouping. There are three contrarian portfolios (CON(12, 30), CON (18,30) and CON (24,30)) having negative return differences that are significant at the 5% level and four portfolios (CON (30,48), CON (36,48), CON (42,48), CON (48,48)) with significant positive return differences (three at the 1% level and one at the 5% level). The remaining 74 portfolios do not exhibit significant differences between the two exchanges.…”

Section: The Profits Of Contrarian Portfolios In Different Exchangesmentioning

confidence: 99%

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Profitability of Contrarian Strategies in the Chinese Stock Market

2015

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This paper reexamines the profitability of loser, winner and contrarian portfolios in the Chinese stock market using monthly data of all stocks traded on the Shanghai Stock Exchange and Shenzhen Stock Exchange covering the period from January 1997 to December 2012. We find evidence of short-term and long-term contrarian profitability in the whole sample period when the estimation and holding horizons are 1 month or longer than 12 months and the annualized return of contrarian portfolios increases with the estimation and holding horizons. We perform subperiod analysis and find that the long-term contrarian effect is significant in both bullish and bearish states, while the short-term contrarian effect disappears in bullish states. We compare the performance of contrarian portfolios based on different grouping manners in the estimation period and unveil that decile grouping outperforms quintile grouping and tertile grouping, which is more evident and robust in the long run. Generally, loser portfolios and winner portfolios have positive returns and loser portfolios perform much better than winner portfolios. Both loser and winner portfolios in bullish states perform better than those in the whole sample period. In contrast, loser and winner portfolios have smaller returns in bearish states, in which loser portfolio returns are significant only in the long term and winner portfolio returns become insignificant. These results are robust to the one-month skipping between the estimation and holding periods and for the two stock exchanges. Our findings show that the Chinese stock market is not efficient in the weak form. These findings also have obvious practical implications for financial practitioners.

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