Overreaction, Delayed Reaction, and Contrarian Profits

Narasimhan Jegadeesh and Sheridan Titman

University of California at Los Angeles, Anderson Graduate School of Management from Anderson Graduate School of Management, UCLA

Abstract: This paper presents a decomposition of short-horizon contrarian profits into various sources based on an analysis os stock price reactions to common factors an firm-specific information. In sharp contrast with the conclusions in the extant literature, we find that the lead-lag structure in stock prices contributes less than 5% of the observed contrarian profits with most of the profits being attributable to stock price overreaction.

Date: 1992-01-01
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