Bridge over ocean
1 November 1999 Financial Analysts Journal Volume 55, Issue 6

Contrarian and Momentum Strategies in Germany

  1. Dirk Schiereck
  2. Werner De Bondt
  3. Martin Weber

Two traditional methods of managing equity portfolios are investing based on price momentum and value-based contrarian investing. These strategies may be motivated by a behavioral theory of under- and overreaction to news or by empirical research, mostly for the NYSE, that has found persistence in price movements over short horizons and reversion to the mean over longer horizons. However, the apparent success of these strategies may be due to institutional factors and the mismeasurement of risk, or it may result from data mining. For these reasons, we studied all major German companies listed on the Frankfurt Stock Exchange for the three decades between 1961 and 1991. The dynamics of stock prices in Frankfurt are remarkably similar to New York. The data suggest that equity prices reflect investor forecasts of company profits that are predictably wrong.

Read the Complete Article in Financial Analysts Journal Financial Analysts Journal CFA Institute Member Content

We’re using cookies, but you can turn them off in Privacy Settings.  Otherwise, you are agreeing to our use of cookies.  Accepting cookies does not mean that we are collecting personal data. Learn more in our Privacy Policy.