Skip to main content
SpringerLink
Log in

Stock Markets Overreaction

Indian Stock Market and Contrarian and Momentum Strategies

  • Chapter
  • First Online:
Capital Markets and Investment Decision Making

Abstract

Contrarian and momentum are two types of investment strategies.

You get recessions, you have, market declines. If you don’t understand that’s going to happen, then you are not ready, you won’t do well in the markets.

Peter Lynch

Raj S. Dhankar & Supriya Maheshwari, A Study of Contrarian and Momentum Profits in Indian Stock Market, International Journal of Financial Management, Vol. 4(2), April 2014.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 109.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 139.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

References

  • Alonso, A. R. (1990). Overreaction in the Spanish equity market. Journal of Banking & Finance, 14, 469–481.

    Article  Google Scholar 

  • Ansari, V. A., & Khan, S. (2012). Momentum anomaly: Evidence from India. Managerial Finance, 38, 206–223.

    Article  Google Scholar 

  • Banz, R. (1981). The relationship between return and market value of common stocks. Journal of Financial Economics, 9, 3–18.

    Article  Google Scholar 

  • Barberis, N., & Vishny, R. (1998). A model of investor sentiments. Journal of Financial Economics, 49, 307–343.

    Article  Google Scholar 

  • Baytas, A., & Cakici, N. (1999). Do market overreact: International evidence. Journal of Banking & Finance, 23, 1121–1144.

    Article  Google Scholar 

  • Brailsford, T. (1992). A test for the winner-loser anomaly in the Australian equity market: 1958–87. Journal of Business Finance and Accounting, 225–241.

    Google Scholar 

  • Campbell, K. (1997). Long term overreaction in the UK stock market and size adjustments. Applied Financial Economics, 7, 537–548.

    Article  Google Scholar 

  • Chan, K. (1988). On the contrarian investment strategy. Journal of Business, 61, 147–163.

    Article  Google Scholar 

  • Cheng, J. W., & Wu, H. (2010). The profitability of momentum trading strategies: Empirical evidence from Honk Kong. International Review of Economics and Finance, 19, 527–538.

    Article  Google Scholar 

  • Conrad, J., & Kaul, G. (1993). Long term overreaction or biased in computed returns. Journal of Finance, 48, 39–63.

    Article  Google Scholar 

  • Conrad, J., & Kaul, G. (1998). An anatomy of trading strategies. Review of Financial Studies, 11, 489–519.

    Article  Google Scholar 

  • Cooper, M., Gutierrez, R., & Hameed, A. (2004). Market states and momentum. Journal of Finance, 59, 1345–1365.

    Google Scholar 

  • Daniel, K. (1998). Investor psychology and security under-and overreactions. Journal of Finance, 53, 1839–1885.

    Article  Google Scholar 

  • DeBondt, F., & Thaler, R. (1987). Further evidence on the investor overreaction and stock market seasonality. Journal of Finance, 42, 557–581.

    Article  Google Scholar 

  • DeBondt, W. F., & Thaler, R. (1985). Does the stock market overreact? The Journal of Finance, XL(3), 793–805.

    Article  Google Scholar 

  • Dhankar, R. S., & Maheshwari, S. (2013). Behavioural finance: A new paradigm to explain momentum effect. Global Journal of Finance and Management, 5(11), 56–61.

    Google Scholar 

  • Fama, E. F., & French, K. R. (1988). Permanent and temporary components of stock prices. Journal of Political Economy, 96, 246–273.

    Article  Google Scholar 

  • Fama, F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33, 3–56.

    Article  Google Scholar 

  • Fama, E. F., & French, K. R. (2007). The anatomy of value and growth stock returns. Financial Analyst Journal, 63(6), 44–54.

    Article  Google Scholar 

  • Fung, A. (1999). Overreaction in the Honk Kong stock market. Global Finance Journal, 223–230.

    Google Scholar 

  • George, T., & Hwang, C. Y. (2004). The 52-week high and momentum investing. Journal of Finance, 59, 2145–2176.

    Article  Google Scholar 

  • Griffin, J., Ji, X., & Martin, S. (2003). Momentum investing and business cycle risk: Evidence from pole to pole. Journal of Finance, 58, 2515–2547.

    Google Scholar 

  • Grinblatt, M., & Han, B. (2002). The disposition effect and momentum. NBER Working Paper Series.

    Google Scholar 

  • Hong, H., & Stein, J. (1999). A unified theory of underreaction, momentum trading and overreaction in asset markets. Journal of Finance, 54, 2143–2184.

    Article  Google Scholar 

  • Hurn, S., & Pavlov, V. (2003). Momentum in Australian stock returns. Australian Journal of Management, 28, 141–156.

    Article  Google Scholar 

  • Ismail, E. A.-F. (2012). Do momentum and contrarian profits exist in the Egyptian stock market. International Research Journal of Finance & Economics, 87, 48–72.

    Google Scholar 

  • Jegadeesh, N., & Titman, S. (2001). Profitability of momentum strategies: An evaluation of alternative explanations. Journal of Finance, 56, 699–720.

    Article  Google Scholar 

  • Jegadeesh, N., & Titman, S. (1993). Returns to buying winners and selling losers: Implications for stock market efficiency. Journal of Finance, 48, 65–91.

    Article  Google Scholar 

  • Kahneman, D., Slovic, P., & Teversky, A. (1982). Judgement under uncertainty: Heuristics and Biases (pp. 287–293). Cambridge University Press.

    Google Scholar 

  • Keim, D., & Stambaugh, R. (1986). Predicting returns in the stock and bondt markets. Journal of Financial Economics, 17, 357–390.

    Article  Google Scholar 

  • Latif, M., Arshad, S., Fatima, M., & Farooq, S. (2011). Market efficiency, market anomalies, causes, evidences and some behavioural aspects of market anomalies. Research Journal of Finance and Accounting, 2(9/10), 1–14.

    Google Scholar 

  • Lee, C., & Swaminathan, B. (2000). Price momentum and trading volume. Journal of Finance, 55, 2017–2069.

    Article  Google Scholar 

  • Liu, W., Strong, N., & Xu, X. (1999). The profitability of momentum investing. Journal of Business Finance & Accounting, 26, 1043–1091.

    Article  Google Scholar 

  • Locke, S., & Gupta, K. (2009). Applicability of contrarian strategy in Bombay stock exchange. Journal of Emerging Market Finance, 165–189.

    Google Scholar 

  • Maheshwari, S. (2013). What goes up, comes down: Critique of overreaction effect over the last three decades. In: International Conference on Technology and Business Management March (Vol. 18, p. 20).

    Google Scholar 

  • Mengoli, S. (2004). On the source of contrarian and momentum strategies in the Italian equity market Stefano. The Journal International Review of Financial Analysis, 13, 301–331.

    Google Scholar 

  • Michello, F. A., Chowdhury, S. H., & Wanorie, T. A. (2013). Lead-lag relationships between stock returns in the Indian stock market. International Research Journal of Applied Finance, IV(4), 592–607.

    Google Scholar 

  • Moskowitz, T., & Grinblatt, M. (1999). Do industries explain momentum? Journal of Finance, 54, 1249–1290.

    Article  Google Scholar 

  • Mun, J. C., Vasconcellos, G. M., & Kish, R. (1999). Tests of the contrarian investment strategy evidence from the French and German stock markets. International Review of Financial Analysis, 8(3), 215–234.

    Article  Google Scholar 

  • Reinganum, M. R. (1983). The anomalous stock market behavior of small firms in January: Empirical tests for tax-loss selling effects. Journal of Financial Economics, 12(89), 104.

    Google Scholar 

  • Rouwenhorst, K. (1998). International momentum strategies. Journal of Finance, 53, 267–284.

    Article  Google Scholar 

  • Rouwenhorst, K. (1999). Local return factors and turnover in emerging stock markets. Journal of Finance, 54, 1439–1464.

    Article  Google Scholar 

  • Sehgal, S., & Balakrishnan, I. (2002). Contrarian and momentum strategies in the Indian capital market. Vikalpa, 27(1), 13–19.

    Article  Google Scholar 

  • Shefrin, H., & Statman, M. (1985). The disposition to sell winners too early and ride losers too long: Theory and evidence. Journal of Finance, 40, 777–779.

    Article  Google Scholar 

  • Soares, J. V., & Serra, A. P. (2005). “Overreaction” and “underreaction” evidence for the Portuguese stock market. Faculdade de Economia da Universidadedo Porto—November.

    Google Scholar 

  • Stock, D. (1990). Winner and loser anomalies in the German stock market. Journal of Institutional and Theoretical Economics, 146(3), 518–529.

    Google Scholar 

  • Strong, N. (1992). Modelling abnormal returns: A review article. Journal of Business Finance & Accounting, 19, 533–553.

    Article  Google Scholar 

  • Swallow, S., & Fox, M. (1998). Long run overreaction on the New Zealand stock exchange. Commerce Division Discussion Paper, 48(48).

    Google Scholar 

  • Tripathi, V., & Aggarwal, S. (2009). The overreaction effect in Indian stock market. Asian Journal of Business and Accounting, 2(1&2), 93–114.

    Google Scholar 

  • Tripathi, V. (2009). Company fundamentals and equity returns in India. International Research Journal of Finance and Economics, Eurojournals.

    Google Scholar 

  • Zarowin, P. (1989). Does the stock market overreact to corporate earnings information? Journal of Finance, 44, 1385–1399.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Faculty of Management Studies (FMS), University of Delhi, New Delhi, India

    Raj S. Dhankar & Supriya Maheshwari

Authors
  1. Raj S. Dhankar
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Supriya Maheshwari
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Raj S. Dhankar .

Rights and permissions

Reprints and permissions

Copyright information

© 2019 Springer Nature India Private Limited

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Dhankar, R.S., Maheshwari, S. (2019). Stock Markets Overreaction. In: Capital Markets and Investment Decision Making. Springer, New Delhi. https://doi.org/10.1007/978-81-322-3748-8_5

Download citation

Publish with us

Policies and ethics

Search

Navigation