Abstract

http://ssrn.com/abstract=1987227
 


 



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


Panagiotis Andrikopoulos


University of Coventry

Arief Daynes


University of Portsmouth - Business School

Paraskevas Pagas


University of Portsmouth

August 11, 2011

International Journal of Banking and Finance, Vol. 8, No. 3, pp. 1-36, 2011

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.

Keywords: Overreaction, Stock market efficiency, Small-size effect, Time-variation, Behavioral finance

JEL Classification: G14, G32

Accepted Paper Series





Not Available For Download

Date posted: January 18, 2012  

Suggested Citation

Andrikopoulos, Panagiotis and Daynes, Arief and Pagas, Paraskevas, The Time-Varying Nature of the Overreaction Effect: Evidence from the UK (August 11, 2011). International Journal of Banking and Finance, Vol. 8, No. 3, pp. 1-36, 2011. Available at SSRN: http://ssrn.com/abstract=1987227

Contact Information

Panagiotis Andrikopoulos (Contact Author)
University of Coventry ( email )
Priory Street
Coventry, CV1 5FB
United Kingdom
+44(0)247 765 7920 (Phone)
Arief Daynes
University of Portsmouth - Business School ( email )
Portsmouth, PO1 3DE
United Kingdom
+44 23 92844182 (Phone)
+44 23 92844037 (Fax)
HOME PAGE: http://www.port.ac.uk/departments/academic/ams/staff/title,1246,en.html
Paraskevas Pagas
University of Portsmouth ( email )
Department of Accounting and Finance
Portsmouth Business School
Portsmouth, Hants PO1 3DE
United Kingdom
+44(0)23 9284 4721 (Phone)
+44(0)23 9284 4037 (Fax)
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