| Summary: | ABSTRACT
The fluctuation of of stock prices, in many occassions, are related to so called t anomalies. One of those anomalies is known as a winner-loser anomaly. A -loser anomaly is identified when stocks that initially earned extremely positive al returns (winners) or extremely negative abnormal returns (losers) experience d reversal, so that losers can outperform winners. The presence of this anomaly a contrarian investment strategy: buy loser-stocks and sell-short the winner
ks, in order to earn significant positif abnormal return. De bondt and Thaler (1985)
ested the overreaction hypothesis as an explanation of this anomaly. The hesis claims that the market tends to overreact to (especially new and dramatic) ation. The market overvalues stock prices as a reaction to good news and alues stock prices as a reaction to bad news. This phenomenon is reversed when
14 recognized that the market has overreacted to the information.
P
The purpose of this research is to test the existence of winner-loser anomaly in the Okarta Stock Exchange. Using market adjusted abnormal return, data from December 090 to June 1997, and overlapping six months formation/test periods, this research Ives not find any indication of market overreaction. So, it is not suggested that investor
uficant difference between average size of winners and losers.
use the contrarian investment strategy. This research also finds that there is no
Key words: winner-loser anomaly, contrarian investment strategy, overreaction, Jakarta Stock Exchange
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