Contrarian Investment, Extrapolation, and Risk

48 Pages Posted: 27 Apr 2000 Last revised: 2 Dec 2022

See all articles by Josef Lakonishok

Josef Lakonishok

University of Illinois at Urbana-Champaign; National Bureau of Economic Research (NBER)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Robert W. Vishny

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: May 1993

Abstract

For many years, stock market analysts have argued that value strategies outperform the market. These value strategies call for buying stocks that have low prices relative to earnings, dividends, book assets, or other measures of fundamental value. While there is some agreement that value strategies produce higher returns, the interpretation of why they do so is more controversial. This paper provides evidence that value strategies yield higher returns because these strategies exploit the mistakes of the typical investor and not because these strategies are fundamentally riskier.

Suggested Citation

Lakonishok, Josef and Shleifer, Andrei and Vishny, Robert W., Contrarian Investment, Extrapolation, and Risk (May 1993). NBER Working Paper No. w4360, Available at SSRN: https://ssrn.com/abstract=227016

Josef Lakonishok (Contact Author)

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Andrei Shleifer

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Robert W. Vishny

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