International Journal of Management and Business Studies

International Journal of Management and Business Studies ISSN 2167-0439 Vol. 8 (2), pp. 001-009, February, 2018. © International Scholars Journals

Full Length Research Paper

Firm-specific attributes and contrarian profits: Evidence from the Taiwan stock exchange

Chu-Chun Cheng¹, Day-Yang Liu¹ and Yen-Sheng Huang²*

¹Graduate Institute of Finance, National Taiwan University of Science and Technology, Taipei, 106, Taiwan.

²Department of Business and Management, Ming Chi University of Technology, Taipei, 24301, Taiwan.

Accepted 19 September, 2017

Abstract

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%.

Key words: Contrarian strategy, overreaction hypothesis.