However, a recent study by Citigroup comparing returns from the two strategies – “going with-the-consensus” and “against-the-consensus” - in all Asian markets, excluding Japan, suggests that it pays to go with the latter.
Likening consensus to "a blind guide in a minefield", Citigroup notes that a model portfolio based on consensus in these markets has underperformed the benchmark by 3.9% since June 1995, while the portfolio, which goes against the consensus, has outperformed the benchmark by 21.1%.
Investors in China, Indonesia and Taiwan would have gained from going with the consensus. Countries where investors would have made money by going against consensus include Malaysia, Thailand, Philippines and Singapore.
Indian investors, the report suggests, could have done well, if they had played the contrarian card, which means buy when the general sentiment is weak and vice-versa.
The four-year Bull Run in Indian equities, which has seen some sharp corrections intermittently during the period, has presented some opportunities to go against the consensus. These include the May 2004 crash, when the Sensex fell over 1000 point’s intra-day, after the Left-backed United Progressive Alliance came into the power.
A more recent incident is the sell-off in May 2006, following which the markets rebounded to an all-time high. However, unlike May 2004, the rebound in May 2006 was not broad-based, with the mid-cap segment continuing to lag the blue chips since then.
Likening consensus to "a blind guide in a minefield", Citigroup notes that a model portfolio based on consensus in these markets has underperformed the benchmark by 3.9% since June 1995, while the portfolio, which goes against the consensus, has outperformed the benchmark by 21.1%.
Investors in China, Indonesia and Taiwan would have gained from going with the consensus. Countries where investors would have made money by going against consensus include Malaysia, Thailand, Philippines and Singapore.
Indian investors, the report suggests, could have done well, if they had played the contrarian card, which means buy when the general sentiment is weak and vice-versa.
The four-year Bull Run in Indian equities, which has seen some sharp corrections intermittently during the period, has presented some opportunities to go against the consensus. These include the May 2004 crash, when the Sensex fell over 1000 point’s intra-day, after the Left-backed United Progressive Alliance came into the power.
A more recent incident is the sell-off in May 2006, following which the markets rebounded to an all-time high. However, unlike May 2004, the rebound in May 2006 was not broad-based, with the mid-cap segment continuing to lag the blue chips since then.
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