The proftablity of contrarian investment strategies need not be the result of stock mar-ket overreaction. Even if returns on individual securities are temporally independent,portfolio strategies that attempt to exploit return reversals may still earn positive ex-pected profits. This is due to the efects of Cros autocovariances from which contrarian strategies inadvertently beneft. We provide an informal taxonomy of return-generating processes that yield positive [and negativel expected profts under a particular contrar-ian portfolio strategy, and use this taxonomy to reconcile the empirical findings of weak negative autocorrelation for returns on individual stocks with the strong positive auto correlation of portfolio returns. We present empirical evidence against overreaction as the primary source of contrarian profits, and show the presence of important lead-lag relations across securities.