In this paper we investigate short-term contrarian investment strategies in the Australian stock market using weekly data of those stocks comprising the All Ordinaries Index during the period 1994-2001. We find both the (Rev. Financ. Stud. 3 (1990) 175) equal-weighted strategy and a new value-weighted strategy yield statistically significant short-term contrarian profits. Importantly, these observed profits could not be fully explained by measurement errors such as bid-ask bounce or by risk, seasonality or volume. Profits are largely related to firm size with overreaction to firm specific information being the primary source of short-term contrarian profits in Australia. However, when a 'practical' short-term contrarian strategy including reasonable transaction costs is implemented, all profits vanish. Thus, while the contrarian approach is not viable as a stand-alone strategy, we argue that it may in fact be value-enhancing when employed as an overlay strategy, particularly in the context of managed funds.