TY - JOUR
T1 - Evolution of short-term contrarian profits
AU - Yang, Xuebing
AU - Zhang, Huilan
N1 - Publisher Copyright:
© 2023, Emerald Publishing Limited.
PY - 2024/1/25
Y1 - 2024/1/25
N2 - Purpose: The purpose of this paper is to study the US stock market and try to explain why short-term contrarian profits have largely disappeared in the past two decades. Design/methodology/approach: In this work, the authors decompose the short-term contrarian profits into cross-sectional variations, firm-level overreactions and lead-lag effects to study the changes in their shares. Then, the authors study the behavior of the subgroups in the winner and loser subportfolios of contrarian investment strategies. Findings: The authors find that short-term contrarian profits have largely vanished since 2000. Changes in the shares of the three components of contrarian profits, which are cross-sectional variations, firm-level overreactions and lead-lag effects, are not the main reason for the disappearance of contrarian profits in the past two decades. Instead, the disappearance of short-term contrarian profits is primarily due to the heterogeneous evolution of subgroups in the portfolio, which leads to a decrease in the overall level of overreactions that drive the contrarian profit. Originality/value: The work explains the disappearance of short-term contrarian profits in the US stock market.
AB - Purpose: The purpose of this paper is to study the US stock market and try to explain why short-term contrarian profits have largely disappeared in the past two decades. Design/methodology/approach: In this work, the authors decompose the short-term contrarian profits into cross-sectional variations, firm-level overreactions and lead-lag effects to study the changes in their shares. Then, the authors study the behavior of the subgroups in the winner and loser subportfolios of contrarian investment strategies. Findings: The authors find that short-term contrarian profits have largely vanished since 2000. Changes in the shares of the three components of contrarian profits, which are cross-sectional variations, firm-level overreactions and lead-lag effects, are not the main reason for the disappearance of contrarian profits in the past two decades. Instead, the disappearance of short-term contrarian profits is primarily due to the heterogeneous evolution of subgroups in the portfolio, which leads to a decrease in the overall level of overreactions that drive the contrarian profit. Originality/value: The work explains the disappearance of short-term contrarian profits in the US stock market.
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U2 - 10.1108/SEF-12-2022-0599
DO - 10.1108/SEF-12-2022-0599
M3 - Article
AN - SCOPUS:85164338428
SN - 1086-7376
VL - 41
SP - 1
EP - 27
JO - Studies in Economics and Finance
JF - Studies in Economics and Finance
IS - 1
ER -