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

Hossein Asgharian and Björn Hansson ()

Applied Economics Letters, 2009, vol. 16, issue 6, 625-628

Abstract: 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.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:16:y:2009:i:6:p:625-628

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DOI: 10.1080/17446540802277161

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