The Time-Varying Nature of the Overreaction Effect: Evidence from the UK
Previous studies on the overreaction effect in the UK show that prior losers consistently outperform prior winners in the period 1975 to 1990. This paper extends current knowledge by assessing the above phenomenon in the UK market for the period 1987 to 2007. In contrast to earlier research, we prod...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Universiti Utara Malaysia
2011-09-01
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| Series: | The International Journal of Banking and Finance |
| Subjects: | |
| Online Access: | https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8427 |
| _version_ | 1828069288398815232 |
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| author | Panagiotis Andrikopoulos Arief Daynes Paraskevas Pagas |
| author_facet | Panagiotis Andrikopoulos Arief Daynes Paraskevas Pagas |
| author_sort | Panagiotis Andrikopoulos |
| collection | DOAJ |
| description | Previous studies on the overreaction effect in the UK show that prior losers consistently outperform prior winners in the period 1975 to 1990. This paper extends current knowledge by assessing the above phenomenon in the UK market for the period 1987 to 2007. In contrast to earlier research, we produce evidence of a weak presence of the overreaction effect for the latest test period. Further, we show that, after adjusting for size, the overreaction effect almost disappears and any additional excess post-formation return to prior-losers is attributable to market cycles. This study implies that the presence of the overreaction effect in the UK stock market is time-varying and difficult to exploit in practice.
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| first_indexed | 2024-04-11T00:15:46Z |
| format | Article |
| id | doaj.art-ca670ff7937c48f59db2c9531b819a2e |
| institution | Directory Open Access Journal |
| issn | 2811-3799 2590-423X |
| language | English |
| last_indexed | 2024-04-11T00:15:46Z |
| publishDate | 2011-09-01 |
| publisher | Universiti Utara Malaysia |
| record_format | Article |
| series | The International Journal of Banking and Finance |
| spelling | doaj.art-ca670ff7937c48f59db2c9531b819a2e2023-01-09T03:08:25ZengUniversiti Utara MalaysiaThe International Journal of Banking and Finance2811-37992590-423X2011-09-0183The Time-Varying Nature of the Overreaction Effect: Evidence from the UKPanagiotis Andrikopoulos0Arief Daynes1Paraskevas Pagas2De Montfort UniversityUniversity of Portsmouth, United KingdomUniversity of Portsmouth, United KingdomPrevious studies on the overreaction effect in the UK show that prior losers consistently outperform prior winners in the period 1975 to 1990. This paper extends current knowledge by assessing the above phenomenon in the UK market for the period 1987 to 2007. In contrast to earlier research, we produce evidence of a weak presence of the overreaction effect for the latest test period. Further, we show that, after adjusting for size, the overreaction effect almost disappears and any additional excess post-formation return to prior-losers is attributable to market cycles. This study implies that the presence of the overreaction effect in the UK stock market is time-varying and difficult to exploit in practice. https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8427OverreactionStock market efficiencySmall-size effectTime-variation,Behavioral finance |
| spellingShingle | Panagiotis Andrikopoulos Arief Daynes Paraskevas Pagas The Time-Varying Nature of the Overreaction Effect: Evidence from the UK The International Journal of Banking and Finance Overreaction Stock market efficiency Small-size effect Time-variation, Behavioral finance |
| title | The Time-Varying Nature of the Overreaction Effect: Evidence from the UK |
| title_full | The Time-Varying Nature of the Overreaction Effect: Evidence from the UK |
| title_fullStr | The Time-Varying Nature of the Overreaction Effect: Evidence from the UK |
| title_full_unstemmed | The Time-Varying Nature of the Overreaction Effect: Evidence from the UK |
| title_short | The Time-Varying Nature of the Overreaction Effect: Evidence from the UK |
| title_sort | time varying nature of the overreaction effect evidence from the uk |
| topic | Overreaction Stock market efficiency Small-size effect Time-variation, Behavioral finance |
| url | https://www.e-journal.uum.edu.my/index.php/ijbf/article/view/8427 |
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