Overreaction and Portfolio Selection Strategies in the Tunisian stock market

Mohamed Ali Trabelsi

MPRA Paper from University Library of Munich, Germany

Abstract: Purpose - This article aims to present a new strategy of portfolio selection. Design/methodology/approach- After having made a comparative survey of different strategies of portfolio selection adopted by portfolio managers in Tunisia, we propose a new strategy, which we call weighted overreaction strategy. This strategy consists in over-weighting the stocks having bad performances in the past. Findings - The new proposed strategy turned out to be more performing than size, PER and overreaction strategies in the Tunisian stock market via a mean equality test. Those who adopt it should create a loser portfolio and should sell it at a later period (12 months) and generate average annual returns of 241.75 %. Research limitations/implications - This result deserves generalization to other stock markets. As the Tunisian stock market is marked by its looseness and low capitalization, applying this strategy over similar or more developed market would open the way for research aiming to define other strategies and to select the best one for each market. Indeed, it should investigate investors’ behaviour which is certainly not the same in each stock market and outline the specific strategy for each market. Practical implications - The weighted overreaction strategy generated a considerable gain compared to other portfolios. Originality/value - The new proposed strategy turned out to be more performing than the other ones.

Keywords: Assets pricin; anomalies; portfolio selection; efficiency; performance; momentum strategies; overreaction. (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G19 (search for similar items in EconPapers)
Date: 2010, Revised 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published in Journal of Risk Finance 3.11(2010): pp. 310-322

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Related works:
Journal Article: Overreaction and portfolio‐selection strategies in the Tunisian stock market (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:81258

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