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.
ASJC Scopus subject areas
- Economics and Econometrics
Wu, Y., Li, Y., & Hamill, P. (2012). Do Low-Priced Stocks Drive Long-Term Contrarian Performance on the London Stock Exchange? The Financial Review, 47(3), 501-530. https://doi.org/10.1111/j.1540-6288.2012.00338.x