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A Volatility Based Contrarian Strategy In the German Stock Market

Bastholm, Sofie LU and Rindeskär, Magnus LU (2013) NEKH01 20122
Department of Economics
Abstract (Swedish)
In this paper we investigate if the German implied volatility index, VDAX, could be used as a good sentiment indicator for a contrarian strategy. For such a strategy to be legitimate there must exist price inefficiencies in the market, which requires that the efficient market hypothesis does not hold. We compare broader index-based contrarian strategies with a buy and hold strategy in the German stock index DAX from 1992-2012. The results shows that the contrarian strategy performs better in bearish periods but that it does not outperform the buy and hold strategy in the overall sample period.
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author
Bastholm, Sofie LU and Rindeskär, Magnus LU
supervisor
organization
course
NEKH01 20122
year
type
M2 - Bachelor Degree
subject
keywords
DAX, VDAX, Implied volatility, Contrarian strategy, The efficient market hypothesis, Behavioral finance, Market timing
language
English
id
3469893
date added to LUP
2013-03-05 10:56:44
date last changed
2013-03-05 10:56:44
@misc{3469893,
  abstract     = {In this paper we investigate if the German implied volatility index, VDAX, could be used as a good sentiment indicator for a contrarian strategy. For such a strategy to be legitimate there must exist price inefficiencies in the market, which requires that the efficient market hypothesis does not hold. We compare broader index-based contrarian strategies with a buy and hold strategy in the German stock index DAX from 1992-2012. The results shows that the contrarian strategy performs better in bearish periods but that it does not outperform the buy and hold strategy in the overall sample period.},
  author       = {Bastholm, Sofie and Rindeskär, Magnus},
  keyword      = {DAX,VDAX,Implied volatility,Contrarian strategy,The efficient market hypothesis,Behavioral finance,Market timing},
  language     = {eng},
  note         = {Student Paper},
  title        = {A Volatility Based Contrarian Strategy In the German Stock Market},
  year         = {2013},
}