Year: 2016
Author: Baule, Rainer, Tallau, Christian
Credit and Capital Markets – Kredit und Kapital, Vol. 49 (2016), Iss. 1 : pp. 57–91
Abstract
We revisit the overreaction hypothesis in the light of information effects. Using a sample period from 2005–2012 covering 2,542 large price changes in the German stock market, our results indicate that information effects can explain both overreaction and underreaction patterns. Specifically, we find that large positive price changes without public information signals are followed by short-term price reversals. In contrast, negative price shocks concurrent with a public announcement are associated by price continuations. The results are robust to size effects and sub-periods. Furthermore, we design a trading strategy to show that the observed return predictability could have been exploited for large negative price changes.
Journal Article Details
Publisher Name: Global Science Press
Language: English
DOI: https://doi.org/10.3790/ccm.49.1.57
Credit and Capital Markets – Kredit und Kapital, Vol. 49 (2016), Iss. 1 : pp. 57–91
Published online: 2016-03
AMS Subject Headings: Duncker & Humblot
Copyright: COPYRIGHT: © Global Science Press
Pages: 35
Keywords: G14 overreaction market efficiency event study
Author Details
-
Predicting Market Reactions to Bad News
Yu, Xiaowen
Xin, Xin
Chen, Liangliang
Kim, Hang Sun
(2018)
https://doi.org/10.2139/ssrn.3144041 [Citations: 1]
| Section Title | Page | Action | Price |
|---|---|---|---|
| Rainer Baule / Christian Tallau: Stock Returns Following Large Price Changes and News Releases – Evidence from Germany | 1 |