Overreaction of Dow stocks
Several studies have found mean reversion in monthly stock returns over long horizons. However, these studies can be challenged for several reasons, including the neglect or possible misspecification of risk premia. The current paper analyzes daily Dow returns over short horizons, which obviates the...
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| Format: | Article |
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Taylor & Francis Group
2016-12-01
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| Series: | Cogent Economics & Finance |
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| Online Access: | http://dx.doi.org/10.1080/23322039.2016.1251831 |
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doaj-c70e9a8c308a4e77a749dc01e0c02b522021-02-18T13:53:22ZengTaylor & Francis GroupCogent Economics & Finance2332-20392016-12-014110.1080/23322039.2016.12518311251831Overreaction of Dow stocksGary Smith0Pomona CollegeSeveral studies have found mean reversion in monthly stock returns over long horizons. However, these studies can be challenged for several reasons, including the neglect or possible misspecification of risk premia. The current paper analyzes daily Dow returns over short horizons, which obviates the most serious issues in long-horizon studies using monthly data. There is strong evidence of overreaction in that large positive and (especially) negative returns tend to be followed by persistent, substantial, and statistically persuasive reversals over the next 10 days.http://dx.doi.org/10.1080/23322039.2016.1251831stock price overreactionregression to the mean |
| collection |
DOAJ |
| language |
English |
| format |
Article |
| sources |
DOAJ |
| author |
Gary Smith |
| spellingShingle |
Gary Smith Overreaction of Dow stocks Cogent Economics & Finance stock price overreaction regression to the mean |
| author_facet |
Gary Smith |
| author_sort |
Gary Smith |
| title |
Overreaction of Dow stocks |
| title_short |
Overreaction of Dow stocks |
| title_full |
Overreaction of Dow stocks |
| title_fullStr |
Overreaction of Dow stocks |
| title_full_unstemmed |
Overreaction of Dow stocks |
| title_sort |
overreaction of dow stocks |
| publisher |
Taylor & Francis Group |
| series |
Cogent Economics & Finance |
| issn |
2332-2039 |
| publishDate |
2016-12-01 |
| description |
Several studies have found mean reversion in monthly stock returns over long horizons. However, these studies can be challenged for several reasons, including the neglect or possible misspecification of risk premia. The current paper analyzes daily Dow returns over short horizons, which obviates the most serious issues in long-horizon studies using monthly data. There is strong evidence of overreaction in that large positive and (especially) negative returns tend to be followed by persistent, substantial, and statistically persuasive reversals over the next 10 days. |
| topic |
stock price overreaction regression to the mean |
| url |
http://dx.doi.org/10.1080/23322039.2016.1251831 |
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AT garysmith overreactionofdowstocks |
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