Industry long-term return reversal

Graham Bornholt, Omar Gharaibeh and Mirela Malin

Journal of International Financial Markets, Institutions and Money, 2015, vol. 38, issue C, 65-78

Abstract: Given that extreme industry returns may herald long-term structural changes in the industries involved that may eventually lead to reversals in industry fortunes, we investigate the evidence for long-term return reversal in industry returns. Our study employs both pure contrarian strategies and late-stage contrarian strategies, and includes extra-long strategy formation periods (up to 132 months) to allow sufficient time for structural changes to begin. We find strong evidence of reversals in the long-term returns of industries. These reversals continue for many years (with valuation effects observed up to 10 years after commencement) and are difficult to reconcile with overreaction.

Keywords: Late-stage contrarian; Reversal; Mergers; Acquisitions (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:38:y:2015:i:c:p:65-78

DOI: 10.1016/j.intfin.2015.05.013

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