Accounting analyses of momentum and contrarian strategies in emerging markets ^*

*Accepted by Yue Ma upon recommendation by Junbo Wang

Abstract

We analyse the momentum and contrarian effects of stock markets in Brazil, Russia, India, China and South Africa (BRICS) using accounting data. The five markets show different characteristics with the Indian market having the strongest momentum effect. Stock markets in China and Brazil show significant short-term contrarian profit and intermediate to long-term momentum profit while South Africa shows short-term momentum effect and intermediate to long-term contrarian effect. The Russian stock market reveals largely insignificant momentum portfolio returns. We also find evidence that the contrarian profits in South Africa and China are caused by relatively high loser returns while positive momentum profit in India results from relatively high winner returns.

Keywords:

• Portfolio
• contrarian
• momentum
• markets
• emerging
• strategies

Acknowledgements

We wish to thank the editor and the anonymous reviewers for their helpful comments and suggestions on the earlier version of the manuscript.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

* Accepted by Yue Ma upon recommendation by Junbo Wang

1. Additionally, serial correlation and underestimation of momentum returns can be avoided as caused by the bid-ask bounce effect when the first price of the post-ranking period and the last price of the ranking period are the same (Hon and Tonks 2001).