Article ID Journal Published Year Pages File Type
964038 Journal of International Financial Markets, Institutions and Money 2013 17 Pages PDF
Abstract

This paper documents evidence of reversals in the long-term returns of international equity markets. We use recent short-term performance to better select contrarian securities that appear ready to reverse. Our late-stage contrarian strategy consistently provides stronger evidence of long-term return reversal than does the traditional pure contrarian strategy when applied to developed and emerging market indices. Despite an absence of cross-sectional contrarian profits for developed markets in our post-1989 subsample, longitudinal analysis provides strong evidence of reversals during this period. Overall, our results suggest that the reversal of long-term returns may be stronger and more pervasive than is generally understood.

► We introduce a new method for detecting long-term return reversal. ► We provide evidence of reversals in developed and emerging market equity indices. ► Cross-sectional strategies do not detect developed markets reversals after 1989. ► Longitudinal analysis uncovers evidence of developed markets reversals after 1989.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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