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The Time-Varying Nature of the Overreaction Effect: Evidence from the UK


Andrikopoulos, Panagiotis and Daynes, Arief and Pagas, Paraskevas (2011) The Time-Varying Nature of the Overreaction Effect: Evidence from the UK. International Journal of Banking and Finance (IIJBF), 8 (3). pp. 1-36. ISSN 1675-7227

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Abstract

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.

Item Type: Article
Uncontrolled Keywords: Overreaction, stock market efficiency, small-size effect, time-variation, behavioral finance
Subjects: H Social Sciences > HG Finance
Divisions: School of Economics, Finance & Banking
Depositing User: Mrs. Norazmilah Yaakub
Date Deposited: 25 Oct 2018 01:41
Last Modified: 25 Oct 2018 01:41
URI: http://repo.uum.edu.my/id/eprint/25033

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