Evaluation of Contrarian Investing Strategy in Tehran Stock Exchange

Document Type : Research Paper

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Abstract

The main purpose of the article is to examine performance of the contrarian investing strategy, which is a new strategy in buying and selling stocks in Tehran Stock Exchange in a specific time frame. Momentum and contrarian investing strategies are two strategies used in stock markets. According to the contrarian investing strategy, stocks having successful performance in past (winner stocks) are sold and stocks having poor and unsuccessful performance (loser stocks) are bought. The article examines the possibility of increasing returns on investment and earning abnormal returns using the contrarian investing strategy and tests it on the basis of returns of portfolios in Tehran Stock Exchange. Statistical population of the research is the companies accepted in Tehran Stock Exchange during the period 2005 to 2010 and its sampling method is screening. Hypotheses testing and data analysis are conducted by SPSS and t-test. The findings show that the average cumulative abnormal returns of winner portfolios are less than those of loser portfolios only in certain points of the mentioned time frames, which is not significant. Therefore, using the contrarian investing strategy in the mentioned time frame has not led to earning excess returns.

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References

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