Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Impact of Credit Risk on Momentum & Contrarian Strategies: Evidence from South Asian Markets

Version 1 : Received: 1 March 2020 / Approved: 3 March 2020 / Online: 3 March 2020 (04:25:40 CET)

A peer-reviewed article of this Preprint also exists.

Imran Hunjra, A.; Tayachi, T.; Mehmood, R.; Malik, S.; Malik, Z. Impact of Credit Risk on Momentum and Contrarian Strategies: Evidence from South Asian Markets. Risks 2020, 8, 37. Imran Hunjra, A.; Tayachi, T.; Mehmood, R.; Malik, S.; Malik, Z. Impact of Credit Risk on Momentum and Contrarian Strategies: Evidence from South Asian Markets. Risks 2020, 8, 37.

Journal reference: Risks 2020, 8, 37
DOI: 10.3390/risks8020037

Abstract

We examine the profitability of the momentum and contrarian strategies in three South Asian markets i.e. Bangladesh, India and Pakistan. We also analyze, whether credit risk influences momentum and contrarian return for these markets from 2008 to 2014. We use Distance-to-default (DD) of Kealhofer, McQuown and Vasicek (KMV) model as a measure of credit risk. We calculate the credit risk and form the momentum and contrarian strategies of the firms on the basis of high, medium and low risk. We find that in all three markets, the momentum and contrarian returns are significant for medium and high credit risk portfolios and no momentum and contrarian returns for low credit risk portfolios.

Subject Areas

momentum returns; contrarian returns; credit risk; stock market; KMV model

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