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A practical perspective on contrarian and momentum investment strategies’ profitability: Evidence from the US, UK and EU12 stock markets

Naporowski, Artur (2014) A practical perspective on contrarian and momentum investment strategies’ profitability: Evidence from the US, UK and EU12 stock markets. PhD thesis, University of York.

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Abstract

The stock return reversal effect (also known as the contrarian anomaly) and the stock return continuation effect (also known as the momentum anomaly) have been under close academic and professional scrutiny for over 20 years now. This is unsurprising given the potentially profound implications therefrom for the worlds of both theory and practice. In the former domain, support for the two past-return-based phenomena would represent strong and direct evidence against the cornerstone of modern financial theory, i.e. the efficient market hypothesis. In the latter domain, abnormal returns to contrarian and momentum investment strategies would mean that investors can outperform the market even by following a simple trading approach. This study focuses on the practical implications of the contrarian and momentum anomalies by considering issues of greatest importance to investors, including: a practicable methodology; realistic stock market conditions; the wider investment context; the economic significance of returns; taxation policies; or risk and market microstructure characteristics. Under consideration is a 12-year time period beginning in January 2000 and the following 13 stock markets: US (NYSE-AMEX), US (NASDAQ), UK (LSE), Bulgaria (BSE-Sofia), Cyprus (CSE), Czech Republic (PSE), Hungary (BSE), Lithuania (VSE), Poland (WSE), Romania (BVB), Slovakia (BSSE), Slovenia (LJSE) and the EU12. The main results of the present research indicate that the contrarian and momentum effects are non-existent in the analysed populations, at least by the adopted specifications and standards. This finding is, therefore, strongly supportive of weak-form efficiency.

Item Type: Thesis (PhD)
Keywords: investment strategies, contrarian, momentum, stock market efficiency
Academic Units: The University of York > The York Management School
Depositing User: Mr Artur Naporowski
Date Deposited: 22 Oct 2015 15:28
Last Modified: 23 Sep 2017 00:18
URI: http://etheses.whiterose.ac.uk/id/eprint/10428

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