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

1
University Institute of Management Sciences, PMAS-Arid Agriculture University Rawalpindi, Rawalpindi 46000, Pakistan
2
Finance Department, Effat University, Jeddah 22332, Saudi Arabia
*
Author to whom correspondence should be addressed.
Risks 2020, 8(2), 37; https://doi.org/10.3390/risks8020037
Received: 1 March 2020 / Revised: 24 March 2020 / Accepted: 9 April 2020 / Published: 14 April 2020
(This article belongs to the Special Issue Credit Risk Modeling and Management in Banking Business)
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 default risk that relates to non-payments of debts by firms as a measure of credit risk. For that purpose, we use distance to default (DD) by Kealhofer, McQuown, and Vasicek (KMV) model as a proxy of credit risk. We calculate the credit risk and form the momentum and contrarian strategies of the firms based on 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. View Full-Text
Keywords: momentum returns; contrarian returns; credit risk; stock market; KMV model momentum returns; contrarian returns; credit risk; stock market; KMV model
MDPI and ACS Style

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. https://doi.org/10.3390/risks8020037

AMA Style

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(2):37. https://doi.org/10.3390/risks8020037

Chicago/Turabian Style

Imran Hunjra, Ahmed, Tahar Tayachi, Rashid Mehmood, Sidra Malik, and Zoya Malik. 2020. "Impact of Credit Risk on Momentum and Contrarian Strategies: Evidence from South Asian Markets" Risks 8, no. 2: 37. https://doi.org/10.3390/risks8020037

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