SHORT-TERM ABNORMAL RETURNS OF THE CONTRARIAN STRATEGY IN THE JAPANESE STOCK MARKET

This paper examines investors’ reactions to extreme events in the Hungarian stock market. We seek to answer the research question whether following extreme events any overreaction of investors can be observed on the Budapest Stock Exchange. With a view to answering the research question, we identify extreme events based on extreme returns on the market portfolio and then – using an event study – we examine abnormal returns on winner and loser equities. After examining investors’ reactions, we inspect the performance of the contrarian strategy in the created event windows. The main result of our research is the presentation that – based on the analysis of the differences between the average cumulative abnormal returns after extreme events – investor overreactions can be observed in the Hungarian stock market. The loser portfolios relating to extreme events significantly outperform winner portfolios connected to the event. The excess return of the contrarian strategy cannot be attributed to differences in the market risk of winner and loser portfolios. The excess return of the strategy can be shown only under tighter extreme value thresholds. The clustering of the event windows with short-term reversal, high market volatility and extreme events is beneficial to the performance of the contrarian strategy. In addition, our research also shows that the purchase of loser portfolios or the development of a contrarian strategy after extreme events may generate profit for investors, since after extreme events the loser portfolios usually beat the market on a horizon of 21 days.

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Profit Analysis of Short Term Weekly Momentum Strategy in the Korean Stock Market

Journal of Derivatives and Quantitative Studies ◽

10.1108/jdqs-04-2015-b0003 ◽

2015 ◽

Vol 23 (4) ◽

pp. 543-569

Author(s):

Jun Ho Hwang

Keyword(s):

Financial Crisis ◽

Stock Market ◽

Abnormal Returns ◽

Short Term ◽

Momentum Strategy ◽

Momentum Strategies ◽

Price Limit ◽

Holding Period ◽

Momentum Profits ◽

Korean Stock Market

This paper shows the momentum strategies that selected stocks based on their returns from a past 1 week generate long lasting significant abnormal returns. I observe the negative momentum profit from 1 week momentum portfolio and it disappears when the holding period is longer than 22 week. In addition, I empirically shows that the weekly momentum strategies are able to generate negative profits also after the financial crisis. it is opposite result with literature, reported positive momentum after the financial crisis, I realize this result due to the characteristic of short term weekly momentum and market adjust returns. The price limit is one of the big features of Korean stock market. I consider the set of sample period by change of price limit. I find the positive momentum profits only in the period of narrow price limit range. For the check on the relation between liquidity and profit of momentum strategy, I employ the illiquid measure of Amihud (2002). I find that the strong and long lasting negative momentum profit from illiquid stock portfolio. This result implied that liquidity enhances the profit of momentum.

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Misvaluation and behavioral bias in the Brazilian stock market

Revista Contabilidade & Finanças ◽

10.1590/1808-057x201805770 ◽

2019 ◽

Vol 30 (79) ◽

pp. 107-122

Author(s):

José Bonifácio de Araújo Júnior ◽

Otávio Ribeiro de Medeiros ◽

Olavo Venturim Caldas ◽

César Augusto Tibúrcio Silva

Keyword(s):

Stock Market ◽

Behavioral Finance ◽

Time Window ◽

Abnormal Returns ◽

Investment Strategy ◽

Short Term ◽

Publicly Traded Companies ◽

Behavioral Biases ◽

Three Samples ◽

Investment Portfolios

ABSTRACT The study sought to apply the model developed by Gokhale et al. (2015) to identify the existence of overreaction and behavioral biases in the Brazilian stock market and analyze its performance as an investment strategy on the São Paulo Stock, Commodities, and Futures Exchange (BM&FBOVESPA) in the short term and long term, as well as test its robustness with time window simulations. The impacts of behavioral finance on capital markets can affect economic decisions, perpetuate or increase asset pricing anomalies, and in more extreme and persistent situations contribute to the formation of bubbles that can compromise the entire financial system of a country. The study pioneers an innovative methodology in the Brazilian stock market for identifying behavioral biases and obtaining abnormal returns and higher returns than the Ibovespa. The research uses the model developed by Gokhale, Tremblay, and Tremblay (2015) in three samples with quotations data for Brazilian publicly-traded companies that compose the Ibovespa and IBrA in the period from 2005 to 2016. With the R statistical software, the Fundamental Valuation Index (FVI) was calculated for each sample share and each year. From the FVI index, the undervalued shares were identified, indicating that the sales price does not reflect their economic fundamentals, and portfolio simulations were carried out for investment over three months or the next year. The results indicate the possible existence of overreaction and behavioral biases in the Brazilian stock market, which lead to the possibility of higher abnormal returns than those of the Ibovespa. Similar to the US market, at the end of the 2006-2016 period simulated portfolios yielded more than 274%, while the Ibovespa yielded approximately 80%. The robustness tests attest to the effectiveness of the model. The various investment portfolios, simulated over different time horizons, yielded more than the Ibovespa on average. The study also confirmed the assumptions of Gokhale, Tremblay, and Tremblay (2015) regarding the model's inadequacy for short-term strategies.

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How Has the Indonesian Stock Market Performed During Covid-19 Outbreaks?

International Journal of Business and Society ◽

10.33736/ijbs.4312.2021 ◽

2021 ◽

Vol 22 (3) ◽

pp. 1420-1428

Author(s):

Doddy Setiawan ◽

Taufiq Arifin ◽

Y Anni Aryani ◽

Josephine Tan-Hwang Yau

Keyword(s):

Stock Market ◽

Abnormal Returns ◽

Term Effect ◽

Short Term ◽

Listed Firms ◽

Finance Industry ◽

Stock Market Reaction ◽

Cumulative Abnormal Returns ◽

First Case ◽

Long Run

This paper analyzes the stock market reaction towards the Covid-19 pandemic by using a sample of Indonesian listed firms. In general, we document a significant negative cumulative abnormal returns when the Indonesian President announces the first case of Covid-19 in Indonesia. This effect remains ten days (weaker) after the announcement. However, we only find a short-term effect on the finance industry. While the explanation is still unclear, the investors may observe that the economic impact on the finance industry may arise in the long-run.

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Do Higher-Rated or Enhancing ESG of Firms Enhance Their Long–Term Sustainability? Evidence from Market Returns in Korea

Sustainability ◽

10.3390/su12072664 ◽

2020 ◽

Vol 12 (7) ◽

pp. 2664 ◽

Cited By ~ 1

Author(s):

Yeonwoo Do ◽

Sunghwan Kim

Keyword(s):

Stock Market ◽

Firm Value ◽

Stock Price ◽

Abnormal Returns ◽

Market Returns ◽

Short Term ◽

Stock Market Returns ◽

Listed Firms ◽

The Third

In this study, we investigate the effects of the level and changes in environmental, social and corporate governance (ESG) rating, an index developed to represent a firm’s long-term sustainability, on the stock market returns of Korea Composite Stock Price Index (KOSPI) listed firms over the period 2011–2018. We find that the changes in ESG ratings have statistically significant short-term effects on their abnormal returns. However, their impacts on short-term abnormal returns decrease some days after the disclosure and become negative in the third year. The results imply that investors in the Korean stock market do not view corporate social responsibility activities as a means of supporting their long-term sustainability, judging from the firm value for a long period after their rating. Rather, based on the effects of the changes on coefficient signs over the period—positive in the year and the year after, no effects in the following year, and negative in the third year and later—we can infer that the short-term oriented market sentiments of investors might worsen their long-term stock performances, thus deteriorating their sustainability and growth opportunities.

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The overreaction hypothesis: the case of Ukrainian stock market

Corporate Ownership and Control ◽

10.22495/cocv11i1c4art5 ◽

2013 ◽

Vol 11 (1) ◽

pp. 406-422 ◽

Cited By ~ 12

Author(s):

Ronald Henry Mynhardt ◽

Alexey Plastun

Keyword(s):

Stock Market ◽

Abnormal Returns ◽

Original Method ◽

Short Term ◽

Daily Fluctuation ◽

Price Movement ◽

Significant Evidence ◽

Contrarian Strategies ◽

Daily Data ◽

Overreaction Hypothesis

This paper examines the short-term price reactions after one-day abnormal price changes on the Ukrainian stock market. The original method of abnormal returns calculation is examined. We find significant evidence of overreactions using the daily data over the period 2008-2012. Our analysis confirms the hypothesis that after an abnormal price movement the size of contrarian price movement is usually higher then after normal (typical) daily fluctuation. Comparing Ukrainian data with the figures from US stock market it is concluded that the Ukrainian stock market is less efficient which gives rise to opportunities for extra profits obtained from trading based on contrarian strategies. Based on results of the research we also recommend some rules of trading on short-term market overreactions.

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Return reversal effect in Shanghai A share market

Managerial Finance ◽

10.1108/mf-04-2018-0140 ◽

2019 ◽

Vol 45 (6) ◽

pp. 698-715 ◽

Cited By ~ 2

Author(s):

Krishna Reddy ◽

Muhammad Ali Jibran Qamar ◽

Marriam Rao

Keyword(s):

Stock Market ◽

Stock Markets ◽

Abnormal Returns ◽

Short Term ◽

Content Type ◽

Reversal Effect ◽

Chinese Stock Markets ◽

Developed Stock Markets ◽

Return Reversal

Purpose The existing literature about return reversal effect in Chinese stock markets is inconclusive and controversial. Therefore, the purpose of this paper is to investigate the presence of return reversal effect in the Shanghai A stock market. Design/methodology/approach The authors used the late-stage contrarian strategy of Malin and Bornholt (2013) for the period March 2011‒March 2016. Findings The results show that there is a long-term return reversal effect in the Shanghai A stock market for the period March 2011‒March 2016. When portfolios are in the formation period (P=24 months), the excess returns are significant in the holding period, Q=6, 9, 12, 24 months. Further, there is also a significant short-term momentum effect in the Shanghai A stock market. For the robustness check, a new reversal factor was introduced into the Fama‒French three-factor model. Results show that portfolios have a smaller size and have lower book-to-market ratios; the return reversal factor explains a portion of the abnormal returns and coefficient of the reversal effect is significant. Research limitations/implications The authors caution readers from generalizing the findings of this study, as the sample is small and the focus is only on A stocks listed on the Shanghai Stock Exchange. Originality/value The present research expands the current literature by providing a comprehensive information about the presence of the long-term and short-term return reversal effects in Shanghai A stock market. Furthermore, the Chinese stock markets have distinctive features in comparison to the developed stock markets in terms of government control, institutional structure, liquidity, cultural background, etc. Such differences affect the pattern in stock returns compared with those observed in developed stock markets. Contrary to previous studies, the present study also accounts for robustness checks. Finally, it also evaluates the possible reasons for the return reversal effect in the Shanghai market.

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A New Momentum Strategy Based on Chinese Securities Market

International Journal of Business and Management ◽

10.5539/ijbm.v14n12p90 ◽

2019 ◽

Vol 14 (12) ◽

pp. 90

Author(s):

Jin Zhang ◽

Yuxiu Zhang ◽

Yongqi Dong

Keyword(s):

Stock Market ◽

Stock Price ◽

Market Price ◽

Abnormal Returns ◽

Theory And Practice ◽

Securities Market ◽

Momentum Effect ◽

Short Term ◽

Market Theory ◽

Momentum Strategy

Facing the current gaps with regard to the momentum effect in Chinese securities market, a momentum strategy was constructed to compare the securities market price under the effective market theory with under the non-effective market theory by the Hushen 300 index from 2006 to 2015 and a stock price residual measurement model. An important result was that the root cause of the momentum effect was systematic irrational behavior. On this basis, a new momentum strategy was constructed based on RSP (Residual of Stock Price), and the performance of that strategy was tested in different ranking and holding periods. The new momentum strategies were obtained positive average cumulative abnormal returns in the super short-term, short term and medium term. This finding confirmed the significant existence of the momentum effect in China’s stock market and the validity of the RSP momentum strategy. Therefore, this finding can be contributed to effectively addressed the current gaps and examine the applicability of classic asset pricing theory and behavioral finance theory in China's stock market. Finally, after considering the transaction costs, the momentum strategy is effective in both theory and practice.

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The Effects of Share Repurchase Announcements on Returns in the Malaysia Stock Market

Indonesian Journal of Business Finance and Accounting ◽

10.32455/ijbfa.v1i1.44 ◽

2018 ◽

Vol 1 (1) ◽

pp. 1 ◽

Cited By ~ 1

Author(s):

Tze San Ong ◽

Pei San Ng

Keyword(s):

Stock Market ◽

Abnormal Return ◽

Small Firms ◽

Abnormal Returns ◽

Share Repurchase ◽

Before And After ◽

Positive Abnormal Return ◽

Repurchase Announcements ◽

Signaling Hypothesis ◽

Firm Characteristic

This paper examines the market response surrounding the share repurchase announcements of Malaysia Listed Companies from years 2012 to 2016. One sample T-test was carried out to identify the abnormal return in the range before and after 20 days from share repurchase announcements. The result shows a significant positive abnormal return in the day of repurchase announcements and continuously until day 1 after the announcements. Multiple regression analysis was performed in order to identify the firm characteristic of share repurchase. The finding is supported with information asymmetric, which shows that stock market reacts more favorably through the repurchase announcements by small firms than large firms. This study is consistent with the signaling hypothesis that shows share repurchase announcement can be an effective tool in stabilizing the stock market in Malaysia. The finding of this study acts as a useful tool for managers and investors to improve their decisions on share repurchase announcements in Malaysia. Company’s managers can conduct share repurchase announcements that are able to make the stock market react positively in order to generate positive abnormal returns.

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