استراتژی های سرمایه گذاری Contrarian برای سهام داد و ستد دوجانبه بهتر کار می کند: مدارک و شواهد از هنگ کنگ

We investigate the profitability of contrarian investment strategies for equities listed on the Hong Kong Stock Exchange (HKEX), which are separated into cross-listed firms and firms listed only in Hong Kong. We also investigate the relationship between stock returns and past trading volume for these equities. We report significantly higher contrarian profits for the period investigated and find that this is a persistent feature of stock returns for cross-listed companies. We also document that contrarian portfolios earn returns as high as 8.01% per month for the dually-traded companies and just 1.83% for only HKEX-listed firms. We find that volume has only a limited ability to explain contrarian profits. All extreme profits disappeared after adjusting for the Fama and French three-factor model.

Lo and MacKinlay (1990) defined a contrarian portfolio investment strategy as one that exploits negative serial dependence in asset returns. They identified a strategy that generated profits that were unrelated to market forces by purchasing historically poorly performing securities and selling historically well-performing securities in the United States. De Bondt and Thaler (1985) were among the first to suggest the idea of contrarian profits; they challenged the notions of market efficiency and rational market behaviour by arguing that contrarian profits were the result of the psychological aspect of individual naïve investors who tend to pay more attention to recent information and less attention to prior data, resulting in stock prices overreacting1 and deviating from their intrinsic values. They argued that prior losers generally out-performed the market, while prior winners under-performed. Hence, investors could buy the losers and short sell the winners to earn an abnormal profit. Research on identifying profitable contrarian strategies has expanded rapidly in recent years, and many studies have documented the profitability of contrarian strategies in various countries. For instance, Brouwer et al. (1997) found contrarian profits in a portfolio of four European countries (France, Germany, Netherlands and the United Kingdom). Mun et al. (1999) showed that short-term contrarian portfolios in France and Germany work better than long-term portfolios. Forner and Marhuenda (2003) provided evidence of lucrative long-term contrarian strategies in the Spanish stock markets. Recently, Novak and Hamberg (2005) observed contrarian profits on non-financial Swedish stocks. Antoniou et al. (2005) found that negative serial correlation is present in the Athens Stock Exchange (Greece), and this again leads to short-term contrarian profits. Turning to the Asia Pacific region, Kang et al. (2002) found statistically significant short-term contrarian profits in China. Chin et al. (2002) found that contrarian strategies produced superior returns in New Zealand. Yoshio et al. (2002), later substantiated by Chou et al. (2007), found that a one-month contrarian strategy concentrating on low trading volume stocks would be effective in Japan. Hameed and Ting (2000), on the other hand, documented a significant relation between contrarian return profitability and trading volume in the Malaysian stock market. While contrarian profits were evident in Malaysia, they admitted that the strategy might not produce economically significant profits if transaction costs were considered. In a similar vein, Lo and Coggins (2006) and subsequently Monagle et al. (2006) reported contrarian profits in Australia. Otchere and Chan (2003) studied the De Bondt and Thaler (1985) version of the contrarian strategy and found that arbitrageurs could not earn excess profits from overreaction in Hong Kong. They observed a small but significant degree of overreaction in Hong Kong prior to the Asian financial crisis. Otchere and Chan (2003) also documented that price reversals were more pronounced for winners than for losers. They noted a delay in price reversal and argued that cultural factors may account for the small size of the price reversal as well as the delay or lack of reversal. Leung and Li (1998) observed that prior losers out-performed prior winners in Hong Kong during the subsequent test in the reversal period. Fung (1999), also using the De Bondt and Thaler (1985) approach, showed that loser portfolios of the 33 stocks in the Hang Seng Index, on average, outperform the winner portfolios by 9.9% one year after their formation periods. However, Fung's study was limited to 33 stocks and failed to consider that a substantial number of companies in Hong Kong are cross-listed in other overseas stock exchanges. Given the large number of companies with foreign listings in Hong Kong, it is important to study how foreign listing affects contrarian profits in this particular market. While this provides a rationale for setting our study in the Hong Kong market, it is worth noting that no study has investigated the impact of dually-traded stocks on contrarian investment profits. The literature on the profitability of dual listing companies shows that these companies generally provide negative returns [see Chowdhry and Nanda, 1991 and Khan et al., 1993, and Hauser and Levy (1998)]. According to Chowdhry and Nanda (1991), when a security is traded in more than one market, it provides more opportunities for informed investors to exploit the private information. In the process of information exploitation, market makers offer pricing information at reduced costs and in a timely manner. As a result, the expected returns of the informed investors are diminished. In a similar vein, Hauser and Levy (1998) studied a small number of dual-listed companies and showed that their stock prices tend to overreact to new information and noise. They observed return volatility differentials across markets and argued that the different trading mechanism may account for this difference. One key point that stands out in the dual listing literature is that this category of firms breeds losers, which, in turn, are good sources for contrarian profits. Whether the losses of dual-listed companies translate into contrarian profits is currently unknown, and the primary objective of our work is to explore this question. The Hong Kong Stock Exchange (HKEX) provides an ideal testing ground for the above theory as Hong Kong is renowned for its openness2; is a good example of an integrated market,3 with a particularly large number of firms listed overseas; and evidence exists of information transmissions with other nations. Wang et al. (2002) investigated the return and volatility behaviour of dually-traded stocks in the domestic Hong Kong market and the foreign market, i.e., London Stock Exchange (LSE). Consistent with Bae et al. (1999), they reported bidirectional evidence of returns and volatility spillover effects between these two markets. However, they observed that the spillover effect is stronger from the Stock Exchange of Hong Kong to the LSE (in accordance with Hauser et al. (1998), who found that price causality in dual-listed stocks is unidirectional from the domestic market to the foreign market). Recently, Agarwal et al. (2007) reported that London market makers use the Hong Kong closing prices as a benchmark for setting the opening prices in London. In addition, most of the markets in which the companies in Hong Kong are dually listed tend to exhibit evidence of contrarian profitability, with the exception of Singapore. Furthermore, this study provides methodological improvement in the area of contrarian profits in the Hong Kong market. There is currently no contrarian investment study that uses the Lo and MacKinlay (1990) approach in Hong Kong. Lo and Mackinlay (1990) differ from De Bondt and Thaler (1985) by using portfolios of winners and losers, whereas De Bondt and Thaler (1985) utilise an abnormal return methodology. Such methodological alteration contributes to the ongoing discussion about what kind of extreme portfolio strategy works best for the Hong Kong market. On one hand, Otchere and Chan (2003) suggested that there were no excess returns from overreaction in Hong Kong, whereas Fung, 1999 and Leung and Li, 1998 showed the opposite. On the other hand, Chui et al. (2005) argued that the Hong Kong market is driven by momentum effects, while earlier momentum studies failed to establish the existence of such a phenomenon. Chui et al. (2000), in contrast, argue that the Hong Kong market exhibits momentum behaviour and that the momentum effects vary from one period to another. They identified momentum profits when they included the pre-1987 periods and showed that the results disappeared when they omitted the period. However, Hameed and Kusnadi, 2002 and Griffin et al., 2003 failed to establish any statistical evidence of momentum in Hong Kong. More recently, Mcinish et al. (2008) examined seven Asian countries, including Hong Kong, and concluded that both momentum and contrarian strategies work in Asia. Another objective of this paper is to contribute to this debate. Additionally, we will explore the potential ability of trading volume to explain our results. The role of trading volume permeates the literature. For example, Blume et al. (1994) presented a model in which technical analysts were able to profit using volume information along with historical price information. In the area of contrarian strategies, Chordia and Swaminathan (1999) observed that trading volume was a significant determinant of the lead-lag patterns in the stock returns of Lo and MacKinlay (1990). Specifically, Chordia and Swaminathan (1999) found that returns of portfolios containing high trading volume led returns of portfolios comprised of low trading volume stocks. They argued that the reason for this lead-lag cross-autocorrelation was the tendency of low-volume stocks to react sluggishly to new information. Hameed and Ting, 2000, Bremer and Hiraki, 1999 and Conrad et al., 1994 also reported that return reversals were more frequently observed for heavily traded stocks than for less traded stocks. However, Yoshio et al. (2002) examined the interaction between past returns and past trading volume in predicting returns over a one-month period in Japan and found that the loser–winner reversal was more pronounced among low trading volume stocks, which was a challenge to Conrad et al. (1994) and most other studies cited above. They also found that low trading volume loser stocks earned higher future returns, but the same patterns were not observed for winner stocks. Lee et al. (2003) and more recently Monagle et al. (2006) found that portfolios of heavily and frequently traded Australian securities tended to earn substantially lower contrarian profits than low trading activity portfolios. Our analysis indicates that there is an evident contrarian phenomenon. We find that, on average, a zero-cost portfolio that invests in past losers and sells past winners earns returns as high as 8.01% per month. These returns are largely driven by dually-traded stocks as the returns in this group are superior to the returns observed for only Hong Kong-listed stocks. Our findings are consistent with Fung, 1999 and Leung and Li, 1998 in that we observe strong contrarian behaviour within the dually-traded portfolios. Furthermore, using the evidence from the only Hong Kong-listed portfolios, we support the findings of Otchere and Chan (2003). However, our results do not sustain the momentum phenomenon in Hong Kong. Interestingly, when we introduce trading volume into the analysis, we find that trading volume does not play an explicit role in predicting future returns of stocks in the short-term for the dually-traded contrarian profit identified. In addition, we find that the Fama and French three-factor model supports the contrarian profits. The remainder of the paper is organised as follows. In Section 2, we present the data and methods used in this paper. Section 3 presents the empirical findings, and Section 4 concludes the paper.

In this paper,weinvestigate various contrarian trading strategies for equities listed on theHongKongStock Exchange.We also consider the role of trading volume and test different formation and holding periods.We find evidence of substantial contrarian profits during the period from1992 to 2006. A zero-cost portfolio that goes long past losers and short past winners earns, on average, up to 8.01% per month. We also report that returns for dually-traded stocks were consistently higher than those for the Hong Kong only listed firms and can thus conclude that contrarian profits in Hong Kong aremainly driven by dually-traded stocks. Inconsistent with the literature, our results indicate that past trading volume does not play an explicit role in predicting future returns of stocks in shorter-term horizons. Moreover, our findings contradict the bulk of the literature aswe find that low trading volume has greater explanatory power than high volume does. An attempt is also made to explain the contrarian effect using the three-factormodel.While the three-factor model of Fama and French provides evidence in support of our strategies, all other profits disappear after adjusting for Fama– French risk factors.