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.
Department/s
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