The time-varying nature of the overreaction effect: evidence from the UK

P. Andrikopoulos, Arief Daynes, Paraskevas Pagas

Research output: Contribution to journalArticlepeer-review

107 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)1-36
Number of pages36
JournalInternational Journal of Banking and Finance
Volume8
Issue number3
Publication statusPublished - 2011

Fingerprint

Dive into the research topics of 'The time-varying nature of the overreaction effect: evidence from the UK'. Together they form a unique fingerprint.

Cite this