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The analysis of the efficiency of selected contrarian strategies on the Warsaw Stock Exchange in the years 2014–2018

Błażej Prusak () and Magdalena Kusowska
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Magdalena Kusowska: Gdańsk University of Technology, Faculty of Management and Economics, Poland

Zeszyty Naukowe Małopolskiej Wyższej Szkoły Ekonomicznej w Tarnowie / The Malopolska School of Economics in Tarnow Research Papers Collection, 2019, vol. 44, issue 4, 25-38

Abstract: Capital multiplication is the main goal of investors and for many years they have been looking for methods and strategies that would enable them to achieve it to the greatest possible extent. Due to the fact that the expectations and characteristics of investors, including those concerning the investment period, are diverse, multiple strategies have emerged. One of such strategies, mainly long-term in nature, is the so-called contrarian investment, consisting in building the portfolio on the basis of selected shares with prices that have not been increasing recently, which has resulted in undervaluation in the context of otherwise relatively positive development prospects of the company. The aim of this article is to examine the efficiency of selected contrarian strategies on the Polish capital market in the years 2014–2018. The analysis was conducted for large companies, i.e. those included in the WIG30 index, and portfolios were constructed using 20% of companies with the lowest P/E and P/BV ratios. The efficiency of the strategy was examined on the basis of the value of portfolios and cumulative rates of return. It has been shown that investments made in accordance with contrarian strategies generate higher rates of return than the allocation of cash in the WIG30 index, which was the benchmark. Among the two investment strategies, much better results were achieved using the P/BV ratio.

Keywords: financial investments; investing in value; contrarian strategies (search for similar items in EconPapers)
JEL-codes: G11 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:znm:journl:v:44:y:2019:i:4:p:25-38

DOI: 10.25944/znmwse.2019.04.2538

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