The Overreaction Hypothesis and the Uk Stockmarket

Clare, Andrew; Thomas, Stephen

doi:10.1111/j.1468-5957.1995.tb00888.x

Cited by 133 publications

(94 citation statements)

References 23 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…The under-reaction and overreaction hypothesis is also investigated in some of the international markets, which are Spain (Alonso & Rubio, 1990), Canada (Kryzanowsky & Zhang, 1992, Australia (Brailsford, 1992), UK (Clare & Thomas, 1995), Japan (Chang et al (1995)), Hong Kong (Akhigbe et al 1998)), Brazil (DaCosta & Newton, 1994), Richards (1997), New Zealand (Bowman & Iverson, 1998), China (Wang et al, 2004), Greece (Antoniou et. al., 2005) and London (Spyrou et.al., 2007).…”

Section: Review Of Related Literaturementioning

confidence: 99%

Stock Market Reactions on Returns and Trading Volume: The Impact of the Global Financial Crisis

Sohail¹,

Rehman²,

Javid³

2017

RECFin

View full text Add to dashboard Cite

Objective: This study empirically examines the short term under-and overreaction effect in the Karachi Stock Exchange, Pakistan, in the context of the 2008 Global Financial Crisis considering the period from September 2007 to 2009. Background: Investors' probable reaction to an anticipated or unforeseen event is gaining immense importance in order to understand the complex market behavior. The arrival of good or bad news can tend to bring about a rise or decline in the stock price even if the news does not directly impact company's performance. Method: The sample data for the stock price, trading volume and KSE 100 index are obtained from the Karachi Stock Exchange (KSE) and Securities and Exchange Commission of Pakistan (SECP) websites for the period September 2007 to 2009. To reach our objective, we used event studies. Results: There is evidence of significant overreaction in the first two weeks and significant underreaction in the 12th and 24th week following specifically in the financial sector. For the non-financial sector, the returns stay positive and insignificant for both the winner and loser portfolios thereby negating any evidence of significant overreaction. Contributions: We wants to contribute to the existing literature, testing the under-and overreaction hypothesis in an emerging market. Our study also attempts to draw attention to any evidence of returns reversal in the loser and winner portfolios based on the trading volume. Investors may capitalize on the trading volume information to earn contrarian profits. Keywords: Underreaction; Overreaction; Efficient Market Hypothesis; Event Study; Return Reversals. INTRODUCTIONInvestors' probable reaction to an anticipated or unforeseen event is gaining immense importance in order to understand the complex market behavior. The arrival of good or bad news can tend to bring about a rise or decline in the stock price even if the news does not directly impact company's performance. Such fluctuations in the prices signify certain anomalies that help to understand the irrational behavior of the investors. Therefore, among other possibilities, the market may overall exhibit under reaction or overreaction -a phenomenon that is attributed to the inconsistent investor behavior, which can be associated with events like the international financial crisis. This study attempts to analyze the presence of any such under and overreaction in the short term, in order to better understand the impact and magnitude of 2008 financial crisis, on the Pakistani stock market. It is expected that there was not any severe impact of 2008 crisis on the local economy due to its limited international linkages.The association between stock prices and new information arrival has led towards the development of hypotheses based on the behavioral aspects of investor decision making. For example, the heuristic of anchoring proposes that people often relate themselves to some specific elements or conditions of reference in order to make decisions conveniently. Brown, Harlow, and Tini...

show abstract

Section: Review Of Related Literaturementioning

confidence: 99%

Stock Market Reactions on Returns and Trading Volume: The Impact of the Global Financial Crisis

Sohail¹,

Rehman²,

Javid³

2017

RECFin

View full text Add to dashboard Cite

show abstract

“…Les études de sur-réaction sur les marchés européens sont celles d'A. Alonso et G. Rubio [1990] en Espagne, T. Vermaelen et Vestringe [1986] en Belgique, A. Clare et S. Thomas [1995] au Royaume-Uni et H.M. Maï [1995] et A. Simon [2003] en France.…”

unclassified

Sur-réaction sur le marché tunisien des actions : une investigation empirique

Trabelsi¹

2009

La Revue des Sciences de Gestion, Direction et Gestion

View full text Add to dashboard Cite

1 Sur-réaction sur le marché tunisien des actions : une investigation empirique TRABELSI Mohamed Ali* Résumé Le marché financier suscite l'intérêt de plusieurs chercheurs, surtout dans le domaine d'évaluation des actifs financiers et de leurs performances. Les recherches antérieures ont identifié plusieurs anomalies du marché, telles que l'effet taille, l'effet lundi, l'effet janvier, l'effet PER, etc. mettant en question la notion d'efficience des marchés et par la suite la prévisibilité des rentabilités boursières.Dans le même contexte, W.F.M. De Bondt et R. Thaler [1985] ont décelé une sur-réaction des cours boursiers : les titres ayant enregistré de mauvaises performances en bourse par le passé connaîtraient ultérieurement des performances supérieures à la moyenne et vice-versa pour les titres ayant enregistré d'excellentes performances.Dans cet article, nous étudions le phénomène de sur-réaction sur le marché tunisien des actions et nous montrons que l'hypothèse de base qui consiste à exploiter la dépendance négative des rendements n'est qu'une condition nécessaire mais non suffisante pour qu'un marché réagit donnant ainsi une explication aux résultats contradictoires des différents auteurs sur l'effet de sur-réaction.Mots clés : Anomalies boursières, choix de portefeuille, efficience, performance, sur-réaction, stratégies contraires.JEL classification : G11, G12, G14, G19. Overreaction on the Tunisian stock market: an empirical testAbstract The financial market interest several researchers, especially in the domain of assessment of the financial assets and their performances. The previous research identified several anomalies of the market, as size, Monday, January, PER effects, etc. putting in question the notion of market efficiency and thereafter the predictability of assets returns.In the same context, W.F.M. De Bondt and R. Thaler [1985] disclosed one stock course overreaction: assets having recorded bad performances in the past in stock market would know performances subsequently superior to the average and vice-versa for assets having recorded excellent performances.In this paper we study the overreaction effect on the Tunisian stock market and we show that the hypothesis of basis that consists at exploiting the negative dependence of returns is a necessary condition but not sufficient so that a market reacts giving an explanation thus to the results contradictory of the different authors on the overreaction effect.

show abstract

“…Aunque los vaivenes en el comportamiento de los mercados y las subsecuentes investigaciones empíricas que buscaron explicarlos -v.g. Taleb (2008), Lo y MacKinlay (2002) y Clare y Thomas (1995) o Mandelbrot (1963Mandelbrot ( , 1966Mandelbrot ( , 1967Mandelbrot ( y 1971, por citar algunos-han erosionado y, por ende, relajado el concepto, éste sigue siendo un referente en la industria y academia.…”

Section: Introductionunclassified