File Name: further evidence on investor overreaction and stock market seasonality .zip
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This study examines whether the Hong Kong stock market overreacts. By using monthly return data of all the common stocks listed on the Hong Kong Stock Exchange from January to December , it examines the profitability of a contrarian strategy of buying prior losers and selling prior winners. The evidence shows that prior losers outperform prior winners by up to Our result is consistent with that documented by Debondt and Thaler for the U. Further tests are conducted to investigate whether changes in betas of the winners and losers account for the abnormal return.
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University of Chicago , Booth School of Business. Behavioral Economics. Constitutional Political Economy 19 4 , , Journal of Economic perspectives 5 1 , , Journal of political Economy 98 6 , , Handbook of the Economics of Finance 1, ,
Lost password? In a previous paper, we found systematic price reversals for stocks that experience extreme long-term gains or losses: Past losers significantly outperform past winners. We interpreted this finding as consistent with the behavioral hypothesis of investor overreaction. In this follow-up paper, additional evidence is reported that supports the overreaction hypothesis and that is inconsistent with two alternative hypotheses based on firm size and differences in risk, as measured by CAPM-betas. The seasonal pattern of returns is also examined. Excess returns in January are related to both short-term and long-term past performance, as well as to the previous year market return. Visit resource.
This chapter examines investor overreaction and seasonality in the stock markets of Korea, Hong Kong and Japan using data for the period of — Seasonality analysis revealed month-of-the-year effects, day-of-the-week effects, the Friday weekend effect and the January effect. The Monday effect was not evident. Schaub, M. Research in Finance Research in Finance, Vol.
Section I, based on CRSP data, extends our earlier results and further discusses the seasonality in the return behavior of extreme winner and loser portfolios. In.
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Investors in Hong Kong tend to overreact to good news but not to bad news in the short run. On the contrary, abnormal losses persist in the test period for the loser stock portfolios. Some evidence of small firm effect is found in this study, but price overreactions are more apparent with large size portfolios. Apart from size, asymmetrical investors' response to good news and bad news also drives stock prices to behave differently after experiencing abnormal gains or losses.
De Bondt and Richard H. Size Related Anomalies The Impact of Investor
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This article presents a survey of recent literature on stock market efficiency, with special reference to the US and Dutch stock markets. Additionally, models are specified and estimated for the daily return since on FTA indices for eleven major stock markets, allowing for non-normality, heteroskedasticity, leverage effects and autocorrelation. The leverage effect and positive autocorrelation are characteristics of some of the indices investigated.
Investors are told to be overreacting when their sentiment drives the price of a certain security up down enough to make it the biggest winners loser , in most cases considering this overreaction period as long as 3 or 5 years. This paper studies the overreaction hypothesis in market indices. However, the returns might be weaker depending on the time period we consider. When implemented only in developed markets there is still evidence which supports the overreaction hypothesis, although the excess returns are economically weaker. Evidence for the overreaction hypothesis was also found when 5-year investment periods were considered. Not only did losers outperform winners, but they were also less risky than winners.
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