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Hot and Cold Strategies: Australian Evidence
Vikash Ramiah, Tafadzwa Mugwagwa, and Tony Naughton
School of Economics, Finance and Marketing, RMIT, GPO Box 2476V, Melbourne, 3001, Australia.

 Address for Correspondence:
Vikash Ramiah
School of Economics, Finance and Marketing
RMIT University
Level 12, 239 Bourke Street
Melbourne, Australia, 3000.
Tel: +61 3 9925 5828
Fax: +61 3 9925 5986
Email: vikash.ramiah@rmit.edu.au

The authors wish to acknowledge the invaluable research assistance of Anh Minh Le, Dharshini Jayaraj, Jin Li, Phuong Nguyen, Hoa Nguyen, Ashwin Madhou, Binesh Seetanah and Stuart Thomas in data gathering, computation, programming, graphing and proofreading. Earlier versions of this paper were presented at the European Financial Management Association 2008 Annual Conference and the Dubai Finance Conference 2008. We thank all participants for their comments and any remaining errors are the responsibility of the authors.
 
Hot and Cold Strategies: Australian Evidence

Abstract
This study explores a high-frequency tactical asset allocation strategy. In particular, we investigate the profitability of momentum trading strategies and contrarian investment strategies for equities listed on the Australian Stock Exchange (ASX). This paper takes into consideration the short-selling restrictions imposed by the ASX on the stocks used in these two strategies. We look at the relationship between stock returns 代写澳洲论文and past trading volume for these equities within our sample portfolios. This research also investigates the seasonal aspects of contrarian portfolios and observes an April effect. We report significant contrarian profits for the period investigated and show that contrarian profit is a persistent feature for the strategies examined. We also document that contrarian portfolios earn returns as high as 6.54% per day for portfolios with no short-selling restrictions, and 4.71% on the restricted model. The results also support the view that volume traded affects stock returns and shows that market imperfections such as short-selling restrictions affect investors’ return.

JEL Classification: G11, G12, G15

Keywords:  Contrarian, Momentum, Turnover Ratio, Past Returns, Short-Selling, Seasonality, Market Imperfections

 Introduction

Asset allocation decisions are challenging tasks for investors. Brinson, Hood and Beebower (1986) and Vora and Ginnis (2000) emphasise the complexity of the challenge at the individual level. Even at the most basic level of choosing between stocks and bonds there are no simple solutions for investors. The traditional assumption that investors have a long term horizon is part of this challenge [(see Merton (1981) and O’Brien (2006)]. Such an assumption in asset allocation usually results in fixed weight asset allocation and clearly such strategies are not appropriate for investors with short-term horizons. Our study focuses on investors with short-term horizons and thus advocates a dynamic asset weight allocation. We propose a zero-cost investment strategy in the form of a contrarian high-frequency tactical asset allocation strategy whereby investors select only stocks; buying extreme losers and short-selling extreme winners on a daily basis.

Reference

Antoniou, Antonios, Emilios C. Galariotis and Spyros I. Spyrou, 2005, Contrarian Profits an本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。