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

Wu, Yuliang; Li, Youwei; Hamill, Philip

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.

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

• Journal Article Type: Article
• Online Publication Date: Jul 6, 2012
• Publication Date: 2012-08
• Deposit Date: Mar 19, 2019
• Publicly Available Date: Aug 19, 2020
• Journal: Financial Review
• Print ISSN: 0732-8516
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 47
• Issue: 3
• Pages: 501-530
• DOI: https://doi.org/10.1111/j.1540-6288.2012.00338.x
• Keywords: Contrarian performance; London Stock Exchange; Price level
• Public URL: https://hull-repository.worktribe.com/output/1113349
• Publisher URL: https://onlinelibrary.wiley.com/doi/full/10.1111/j.1540-6288.2012.00338.x