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A test for the winner-loser anomaly in the Australian equity market: 1958-1987

thesis
posted on 03.10.2017, 00:06 authored by Tim Brailsford
The winner-loser anomaly implies that investors can earn arbitrage profits by purchasing shares which have earned extreme negative returns, and selling short shares which have earned extreme positive returns. Previous U.S. evidence has shown that these companies undergo price reversals in periods following their extreme return behaviour. Such behaviour is anomalous in the sense that it appears inconsistent with market efficiency.
This thesis tests for the existence of the winner-loser anomaly in the Australian equity market, using monthly data for the period 1958 to 1987. It is found that extreme winners undergo price reversals, but extreme losers continue to earn negative abnormal returns. The difference between the loser and winner portfolios is not statistically significant, and hence it appears that the winner-loser anomaly is not present in the Australian market. These results are found to be robust with respect to variants of methodological procedure.


History

Campus location

Australia

Principal supervisor

Rob Brown

Year of Award

1990

Department, School or Centre

Accounting and Finance

Course

Masters of Economics

Degree Type

Masters

Faculty

Faculty of Business and Economics

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