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On the usefulness of the contrarian strategy across national stock markets: A grid bootstrap analysis


  • Kim, Hyeongwoo


This paper statistically evaluates the usefulness of the contrarian investment strategy across the national stock markets of 18 developed countries. The contrarian strategy implicitly assumes that asset prices tend toward a fundamental value path over time. Conventional bootstrap analyses and panel unit root tests are often consistent with such a hypothesis. However, these results might be contaminated by small-sample bias and/or by not controlling cross-section dependence. Correcting for small-sample bias nonparametrically, I find extremely slow mean reversion rates, which provide strong evidence against the usefulness of the contrarian strategy.

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  • Kim, Hyeongwoo, 2009. "On the usefulness of the contrarian strategy across national stock markets: A grid bootstrap analysis," Journal of Empirical Finance, Elsevier, vol. 16(5), pages 734-744, December.
  • Handle: RePEc:eee:empfin:v:16:y:2009:i:5:p:734-744

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    References listed on IDEAS

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    Cited by:

    1. Kim, Hyeongwoo & Stern, Liliana V. & Stern, Michael L., 2010. "Half-life bias correction and the G7 stock markets," Economics Letters, Elsevier, vol. 109(1), pages 1-3, October.
    2. Kim, Hyeongwoo & Ryu, Deockhyun, 2015. "Measuring the speed of convergence of stock prices: A nonparametric and nonlinear approach," Economic Modelling, Elsevier, vol. 51(C), pages 227-241.
    3. Hyeongwoo Kim & Jintae Kim, 2014. "London Calling: Nonlinear Mean Reversion across National Stock Markets," Auburn Economics Working Paper Series auwp2014-13, Department of Economics, Auburn University.
    4. Shu-Ling Chen & Hyeongwoo Kim, 2011. "Nonlinear Mean Reversion across National Stock Markets: Evidence from Emerging Asian Markets," International Economic Journal, Taylor & Francis Journals, vol. 25(2), pages 239-250.
    5. Kim, Hyeongwoo & Durmaz, Nazif, 2012. "Bias correction and out-of-sample forecast accuracy," International Journal of Forecasting, Elsevier, vol. 28(3), pages 575-586.


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