This study investigates the effectiveness of the contrarian investment strategy in the
Indonesian stock market compared to international markets, specifically in U.S
market. With the increasing popularity of stock investments due to their
accessibility, liquidity, and transparency, investors must adopt strategies to
optimize returns and mitigate losses. The contrarian strategy, based on the theory
that stocks with extreme returns (either high or low) will eventually reverse, offers
an alternative to traditional market assumptions. Building on De Bondt and Thaler's
(1985) findings, this research evaluates "winner" and "loser" stocks using historical
data, which is the monthly return. Furthermore, this research finds that despite of
having several raw returns, the contrarian strategy however is unable to generate
profit in both U.S. and Indonesian market. These raw returns are solely
compensation of exposure to market, size, and value risk rather than a true abnormal
profit. Those kinds of stocks can earn extra return even without any special strategy,
because they carry known risk exposures. Moreover, market behavior proxies in
this study are unable to explain and influence the movement of contrarian returns.