1
Q
- Definition Contrarian strategy
- What is the opposite str called
A
Buy past losers, sell past winners. Opposite is called Relative Strength Str.
2
Q
3 plausible sources of returns. And which one is important?
A
- Cross-sectional dispersion in expected returns: a similar component in a Winner stock
- Serial covariance of factor-related returns
- Average serial covariance of the idiosyncratic component => only source
3
Q
Why do both, contrarian str and relative strength str, have positive returns?
A
They are positive in different holding periods.
- contr: in s-t (1m/ 1w) or really l-t (3-5y)
- relative: (3-12m)
4
Q
Efficient market vs inefficient market
What kind of returns?
A
Systematic risk bearing returns - firm-specific returns
