Contrarian investment strategies in the developing markets - Imran Almaleh
اال استراتيجياتالنامية المالية األسواق في المعاكس ستثمار
في تطبيقية دراسةالسعودي األسهم سوق(تداول)
Contrarian investment strategies in the
An application on the Saudi stock market (Tadawul)
IMRAN ALMALEH, BSBA, CFA LII
In 1977, Basu was the first to publish a research in the field of
contrarian investing. he proved that 'average annual returns' increase as
we move from high PE stocks to low PE stocks.
The aim of this study is to search for the so called Value Premium in the
developing markets in general, and especially in the Saudi stock market
as there was no recent research conducted within this market in this
field of study.
The contrarian investment strategy in based on the assumption that
prices in the market do not reflect the intrinsic value of the stocks,
creating a lot of mispricing across the marketplace.
This study has concluded that this strategy is not favorable for use in
the Saudi stock market, as it has generated inferior returns compared to
the growth portfolio and the market portfolio, in most of the cases of
different holding periods analyzed in this study (1, 2, and 3 years)
The study also reviled the inefficiencies and predictability in the Saudi
stock market index TASI on the short term basis, through the analysis of
autocorrelation in its returns, and concluded that the market does not
follow a random walk.