Momentum, contrarian, and the January seasonality

Yao, Yaqiong (2012) Momentum, contrarian, and the January seasonality. Journal of Banking and Finance, 36 (10). pp. 2757-2769. ISSN 0378-4266

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This paper reexamines the apparent success of two prominent stock trading strategies: long-term contrarian and intermediate-term momentum. The paper demonstrates that long-term contrarian is entirely attributable to the classic January size effect, rather than to investor overreaction, as argued by De Bondt and Thaler (1985). Further, the paper also resolves the Novy-Marx (2011) concern about whether return autocorrelation “is really momentum” by demonstrating that the superior performance of intermediate-term momentum is due to strong January seasonality in the cross-section of returns. The implications are that long-term contrarian must be considered largely illusory, and intermediate-term momentum must take account of annual seasonalities in returns.

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Journal Article
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Journal of Banking and Finance
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30 May 2013 09:04
Last Modified:
21 Nov 2022 23:51