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An analysis of momentum and contrarian anomalies using an orthogonal portfolio approach

Author

Summary, in English

We use a latent factor approach to investigate if the momentum and contrarian profits, observed in the US stock market, should be considered as risk premiums or have nonrisk-based explanations. The model is also employed as a benchmark to assess the explanatory power of the traditional asset-pricing models in this context. Our findings show that the profits of the long-run contrarian strategy are related to some other background risk factors, whereas the momentum and the short-run contrarian profits are mostly nonrisk based. The latter finding mainly supports investors' behavioural irrationality as an explanation of these anomalies.

Publishing year

2009

Language

English

Pages

625-628

Publication/Series

Applied Economics Letters

Volume

16

Issue

6

Document type

Journal article

Publisher

Routledge

Topic

  • Economics

Status

Published

ISBN/ISSN/Other

  • ISSN: 1466-4291