Middle East Countries’ Stock Markets Under Contrarian And Momentum Strategies

1811 words - 7 pages

This research aims to investigate the Middle East countries’ stock markets within the framework of momentum and contrarian strategies. Potential foreign investors, who have been able to make direct investments in the Middle East countries’ stock markets, should study the recent history of these stock markets in order to understand the risks that accompany the high returns. Accordingly this research considers the Middle East countries’ stock markets from January 1997 to December 2010 and provides an analysis of their performance under various momentum and contrarian strategies. The research method that is employed draws upon and is an extension of Lo, Andrew W. and A. Craig MacKinlay, 1990 and Jegadeesh, Narasimhan and Sheridan Titman, 2001.

Problem
Numerous studies have uncovered stock return anomalies based on trading strategies. For example, Jegadeesh and Titman (1993) find that trading strategies which buy past 6 to 12 month winners and short sell past losers earn significant profits over the subsequent 6 to 12 month period. Moskowitz and Grinblatt (1999) further show that such momentum effects are mainly driven by industry factors in the sense that the profitability of individual stock momentum strategies can be substantially explained by industry momentum. That is, momentum strategies that buy stocks from past winning industries and sell stocks from past losing industries are highly profitable and can capture almost all the profits from individual stock momentum strategies. They also show superior returns to industry momentum strategies after adjusting for size, book-to-market, and microstructure effects. While Moskowitz and Grinblatt (1999) show the existence of an industry momentum effect, the sources of its profitability are unclear. They conjecture that such an effect might be due to ‘‘. . .there are. . . hot and cold sectors of the economy, and investors may simply herd toward (away from) these hot (cold) industries and sectors, causing price pressure that could create return persistence.’’ (p. 1287). This conjecture is consistent with a number of plausible explanations. For instance, Conrad and Kaul (1998) claim that momentum profits are primarily due to cross-sectional variation in unconditional mean returns. According to Conrad and Kaul’s arguments, if realized returns are strongly correlated to expected returns, then past winners (losers) that have higher (lower) returns tend to yield higher (lower) expected returns in the future. Thus, momentum strategies that buy past winner industries and short sell past loser industries would be profitable. Alternatively, the price momentum can also be explained by several existing behavioral models (e.g. Barberis et al., 1998; Daniel et al., 1998; Hong and Stein, 1999), which attempt to provide a theoretical framework for the empirical return anomalies documented in the finance literature. Hong and Stein (1999) propose a framework under which there are two types of investors: news...

Find Another Essay On Middle East Countries’ Stock Markets under Contrarian and Momentum Strategies

Insider Trading In Stock Markets And SEBI.

10058 words - 40 pages Stock Exchanges were rather helpless in redressing the investor's problems because of lack of proper penal provisions in the existing legislation.Realizing this, SEBI was constituted by the Government in April 1988 as a supervisory body to regulate and promote the securities market.LEGAL STATUS OF SEBIInitially, SEBI was established as an interim body under the administrative control of the Finance Ministry. Recently it was given statutory powers

CISCO’s Operations and Strategies in Foreign Markets

1382 words - 6 pages Cisco incorporated has grown significantly over the years, since its inception and has established itself as the number one technology company throughout the industry. Initially, Cisco started as manufacturers of modems and routers, and has expanded its scope over the years. This paper will attempt to address Cisco’s operations and strategies in foreign markets it will also delve into the strengths, weaknesses and threats in the political, legal

constructing and naturalizing the middle east

7466 words - 30 pages Term "Middle East" My essay works toward both Stewart's and Lockman's appeals by contributing a geographical critique of a place not only about which Americans are "misinformed" but also with which we are increasingly engaged. Because, as will become evident, the United States and Great Britain were the two countries that had the most influ- ential roles in constructing the region, my focus is on the origins, definitions, delin

American Politics and the Middle East

2190 words - 9 pages a crucial role in the Middle East, and more often than not, is considered as one of the Middle East nations (Schmitt & Cordesman 2009). Recently, Connie (2007) cited that the two countries alone receive almost two thirds of the fund released annually by America under the Economic Support Fund. Although this aid is considered as a development fund; Maoz & Lenore (2010) states it is quite clear that it is only advanced to those countries the U.S

Terrorism and Culture of the Middle East

4947 words - 20 pages Terrorism and Culture of the Middle East Introduction In 1993, a Harvard political scientist named Samuel P. Huntington wrote a controversial article entitled “The Clash of Civilizations” in Foreign Affairs. At this point the Gulf War was still fresh in the minds of most Americans. The most poignant issues at the time were the threat of Suddam Hussein, nuclear weapons, and the establishment of the Strategic Arms Reduction Treaty. Also

Usama, The Middle East, and The Crusades

1565 words - 6 pages The selection from Usama Ibn Munqidh’s Kitab al-l’tibar otherwise know in English as the Book of Contemplation is a book in which Usama provides a series of short vignettes as a testimony to his experiences in the medieval Middle East and the Crusades. Through his writings the reader is able to get a Muslim account of the Crusades. It is largely a personal account so many details are left out and much background knowledge is assumed. It also is

Marketing Spotlight - Microsoft Competitive Markets and Marketing Strategies

1370 words - 5 pages Microsoft was founded in 1975, when Bill Gates left Harvard at age 19 to work with high school friend Paul Allen on a version of the BASIC programming language. After moving the company from Albuquerque, New Mexico, to Seattle in 1979, Gates and Allen began writing operating system software. What happened to the company since its founding is a well-known and often-told story. Here are highlighted a few of the key strategies that enabled

Population Overview and Growth in the Middle East

957 words - 4 pages under 15, and 46 percent of Palestinians were also in that age group. The smallest proportions were in Kuwait, the United Arab Emirates and Qatar, where only 26 percent of the population was younger than 15 years. This young population will soon reach their maturity and reproduce, causing a baby boom similar to the one in the United States after the Vietnam War.The population spurt in the Middle East was also fueled by a growing labor need

Understandings and Approaches to Human Trafficking in the Middle East

1719 words - 7 pages around the interpretations of the widely accepted UN’s Palermo Protocol’s definition of human trafficking, concerns in regards to the depictions of victims of human trafficking, and questions regarding what are the most effective strategies in preventing certain kinds of trafficking. As much of the media coverage, research, and policies have tended to focus on sex trafficking of women and girls within the Middle East, Mahdavi and Sargent argue in

Major Demographic Changes in the Middle East and North Africa

961 words - 4 pages 928,000 in Alexandria. In 2003 the population was estimated at 74,718,800, with 8,1 million in Cairo, and nearly 4 million in Alexandria. All countries in the region have experienced a massive rise in population, with accurate figures for most countries being available throughout the twentieth century with the introduction of comprehensive census collection data in North Africa and the Middle East – Saudi Arabia holding its first census in 1974

Citizen Protest In Nazi Germany and the Middle East

1046 words - 4 pages The situation that is occurring in the Middle East is not the first political unrest that has occurred. The actions that have been taken to stifle the protestors are not similar to the actions that Nazi Germany took to suppress the Jews. The actions that differentiate these two groups are the circumstances that caused these violent acts to come about. The leader of Egypt and Hitler are two entirely different beings. The underlying causes of the

Similar Essays

The History Of Iran, Turkey, And Iraq. This Essay Represents The Notes Of A History Course About The Countries Of The Middle East.

1930 words - 8 pages , M. Ali and his son seized them by force in 1830.In 1840 (10 years later), there was a civil war in Lebanon, and M. Ali was at the doors of Assitanah. So the European powers helped the Sultan to regain those countries (and protected him from Egypt), because:- The ottomans were considered like sickmen,- Europe did not want M. Ali Pasha to take over Turkey.Turkey ResurgentIn 1918, turkey was defeated. The new Sultan, Mohammad VI dissolved the

Global Melting Pot Not Oneself Anymore! The Influence Of Globalization On People In One Of The Middle East Countries, Oman

1024 words - 4 pages well-being in societies around the world. Yet, is it true that it has changed the people we are?Let us begin by looking at how globalization has changed our appearance. It's worth stating that most countries, nowadays, have given up their traditional dress. A typical man wears a t-shirt and trousers while a woman wears a fashionable dress and most likely a blouse and a skirt. Although our globalized markets provide unlimited designs of clothes, we

Middle East And Canada Essay

4662 words - 19 pages regional importance and in order to reflect both official languages. Beginning with a randomly selected date within the first three days of October (October 2), we sampled each of these papers every third day until December 31. Each of these issues was examined in its entirety for material dealing with the Middle East and all items identified were coded under several categories of analysis. All coding was done by the authors, with interceder

Risk Management In Stock Valuation And Markets

2705 words - 11 pages . (2012). The review of macroeconomic factors and stock returns. International Business Research, 5(2012), Goswami, Jung. (1997). Stock market and economic forces: Evidence from korea. (n.d.). Factors affecting stock prices in the the uae financial markets. HÜBNER. (2003). The generalized treynor ratio. BAKER, WURGLER. (2006). Investor sentiment and the cross-section of stock returns. THE JOURNAL OF FINANCE, LXI(2006), BAKER, WURGLER