European Journal of Accounting, Finance and Investment

A Test Of Financial Anomalies In Nigerian Equity Market: Contrarian Versus Momentum

Prof Jegede, Charles Ayodele

Department of Finance, Faculty of Management Sciences, Lagos State University, Lagos, Nigeria

Ajibola, Arewa (PhD)

Department of Finance, Faculty of Management Sciences, Lagos State University, Lagos, Nigeria

Oluyemi Akinfenwa

Department of Finance, Faculty of Management Sciences, Lagos State University, Lagos, Nigeria

Keywords: Short position, long position, inefficiency, anomalies

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Abstract

In this study, we made an attempt to investigate financial market anomalies based on momentum-contrarian strategies in Nigerian equity market for the sample size January 2012 to December 2018. Our results indicated that the individual monthly average returns exhibit negative value more for short term holding period. However, contrarian portfolio returns do not have negative return for the three month holding period and for the remaining holding periods it displays few negative returns. Momentum portfolio exhibits more negative returns in each of the holding period. In the three-month holding period we have evidence to support that investors can make superior profit using contrarian strategy, while, the momentum strategy investors cannot make superior profit in the Nigeria stock market. We also find that there is significant difference between momentum strategy and contrarian strategy using the three-month holding period scheme. For the rest holding periods, six-month, nine-month and twelve-month, no investor can use momentum or contrarian strategy to make significant profit. Thus, there is no difference between momentum and contrarian strategies in the Nigerian stock market for these periods. We concluded that holding contrarian portfolio for three-month scheme provides the chances to earn more positive return than holding either the bech-mark portfolio or momentum portfolio.

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