Evaluation Of Momentum And Contrarian Strategies For Conventional And Shariah-Compliant Securities: Evidence From Pakistan Stock Exchange

Abstract

The purpose of this study is to examine the momentum and contrarian profits in the Pakistan Stock Exchange's conventional and Shariah markets. Following the overlapping momentum technique of Jagdeesh and Titman (1993), both markets were analyzed for various combinations of J (formation period) and K (holding period). The findings revealed that long-term holding periods of conventional markets show the presence of contrarian profits (12, 18 and 24 months). However, the momentum strategies have a stronger presence in Pakistan's Shariah markets. Moreover, contrarian strategies have a limited presence in Shariah contexts, for long-term holding periods. This study indicates the existence of arbitrage profits in both markets, and investors should continue to monitor the performance of winners and losers in order to maximize returns on portfolio investments.