Contrarian Investment Strategy: an Empirical Test Based on Data Envelopment Analysis

Abstract

Studied about profitability of contrarian investment strategy in the Iranian capital market can be classified in two classes: 1. researches based on historical returns, and 2. researches based on fundamental variables. This study using Data Envelopment Analysis (DEA) provides possibility that can historical return variable and fundamental variables to be used simultaneously. We use portfolio study methodology. This study has done in three two-year periods in the Tehran Stock Exchange during 1385-1388 (Iranian Calendar). We find that contrarian investment strategy to obtain excess returns over all.

Keywords

• overreaction
• contrarian investment strategy
• miss pricing
• data envelopment analysis