Abstract

Chu-Chun Cheng1, Day-Yang Liu1and Yen-Sheng Huang2*

This paper examines the performance of contrarian strategies and investigates whether such contrarian profits are related to firm-specific attributes. Using data from all listed stocks on the Taiwan stock exchange over the period 1990 - 2008, this paper finds a significant abnormal return of 19.39% earned by the contrarian strategy of buying prior losers and selling prior winners ranked by the cumulative abnormal returns over the three-year performance period. Moreover, firm-specific attributes can be utilized to enhance the performance of the contrarian strategy. The contrarian strategy of buying the losers in the bottom market- to-book quartile and selling the winners in the top market-to-book quartile earns a significant abnormal return of 41.18%.