The winner-loser anomaly : recent evidence from Greece

O’ Keeffe, Cormac and Gallagher, Liam A. (2017) The winner-loser anomaly : recent evidence from Greece. Applied Economics, 49 (47). pp. 4718-4728. ISSN 0003-6846

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Abstract

This article finds evidence of significant reversals in returns over the medium term in Greek stocks. In contrast with previous research, return reversals are more pronounced for past winners, suggesting that the market overreacts to a greater extent to good news. These contrarian returns are particularly elevated when portfolios are formed using quartiles and during tranquil and bull markets. The optimum contrarian strategy involves skipping the first 6 months of the holding period and implementing the contrarian strategy for a period of 18 months, as returns exhibit continuation followed by reversal. The profitability of the contrarian investment strategy is robust to adjustments for risk and seasonalities. It is the tranquil times and not the crisis/volatile times that generates a significant and profitable contrarian strategy. The recent credit crisis and resulting stock market falls, resulted in extreme movements in some Greek stocks and testing of the contrarian strategy problematic, especially when portfolios are decile ordered. Our findings also highlight the importance of survivorship bias and also suggest that contrarian strategies that just use market beta may be ill-equipped to take into consider extreme market movements, illiquidity and short-sales constraints.

Item Type:	Article
Additional Information:	Publisher Copyright: © 2017 Informa UK Limited, trading as Taylor & Francis Group.
Uncontrolled Keywords:	/dk/atira/pure/subjectarea/asjc/2000/2002
Departments or Groups:
Depositing User:	Admin SSL
Date Deposited:	19 Oct 2022 23:10
Last Modified:	07 Jun 2023 18:45
URI:	http://repository-testing.wit.ie/id/eprint/4432

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