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Do low-priced stocks drive long-term contrarian performance on the London Stock Exchange?

Wu, Yuliang; Li, Youwei; Hamill, Philip

Authors

Yuliang Wu

Philip Hamill



Abstract

We investigate whether low‐priced stocks drive long‐term contrarian performance on the U.K. market. We find that contrarian performance at low, middle, and high price levels is positive. On the Fama‐French risk adjusted basis, we find both low‐priced and middle‐priced losers have significantly positive returns. When we adjust returns by market and liquidity risk, only middle‐priced losers maintain their positive returns. Our results reveal that low‐priced stocks are not fully responsible for contrarian performance. Our empirical evidence is generally consistent with the overreaction hypothesis and behavioral models of value investing.

Journal Article Type Article
Publication Date 2012-08
Journal Financial Review
Print ISSN 0732-8516
Electronic ISSN 1540-6288
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 47
Issue 3
Pages 501-530
APA6 Citation Wu, Y., Li, Y., & Hamill, P. (2012). Do low-priced stocks drive long-term contrarian performance on the London Stock Exchange?. Financial Review, 47(3), 501-530. https://doi.org/10.1111/j.1540-6288.2012.00338.x
DOI https://doi.org/10.1111/j.1540-6288.2012.00338.x
Keywords Contrarian performance; London Stock Exchange; Price level
Publisher URL https://onlinelibrary.wiley.com/doi/full/10.1111/j.1540-6288.2012.00338.x

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Copyright Statement
©2012 The authors. All rights reserved. No part of this publication may be reproduced without the written permission of the copyright holder



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