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| Author: | Dissanaike, G. |
| Title: | Do stock market investors overreact? |
| Journal: | Journal of Business Finance and Accounting
1997 : JAN, VOL. 24:1, p. 27-49 |
| Index terms: | STOCK MARKETS SHARE PRICES FINANCIAL RISK INVESTORS |
| Language: | eng |
| Abstract: | This paper investigates the evidence on the stock market overreaction hypothesis (ORH), which holds that, if stock prices systematically overshoot as a consequence of excessive investor optimism or pessimism, price reversals should be predictable from past price performance. The ORH stands in contradiction to the efficient market hypothesis which is a cornerstone of financial economics. This study is unique in the overreaction literature because it is restricted to larger and better-known listed companies, whose shares are more frequently traded. This restriction more or less eliminates two alternative explanations to the overreaction hypothesis: it minimises the influence of bid-ask biases and infrequent trading, and reduces the possibility that reversals are primarily a small-firm phenomenon. |
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