Systematic Patterns Before and after Large Price Changes: Evidence from High Frequency Data from the Paris Bourse

Posted: 8 Feb 1999

See all articles by Foort Hamelink

Foort Hamelink

Lombard Odier Asset Management (SA); VU University Amsterdam

Abstract

This paper examines the intra-day behavior of asset prices shortly before and after large price changes. Whereas similar studies so far have been based on daily closing price, I use three years of high frequency data of 120 stocks listed on the French stock exchange. Various systematic patterns, in addition to those often reported in the literature, emerge from this data. I find evidence that prices do overreact and that a correction takes place after a large price movements, especially those to the downside. The correction does not take place immediately after the large price change. Prior to this, some very significant and sometimes economically important patterns can be observed. When the bid-ask spread is taken into account, I still find some ex-post profitable trading strategies which are too small in magnitude to suggest market inefficiency.

JEL Classification: G10

Suggested Citation

Hamelink, Foort, Systematic Patterns Before and after Large Price Changes: Evidence from High Frequency Data from the Paris Bourse. Available at SSRN: https://ssrn.com/abstract=147235

Foort Hamelink (Contact Author)

Lombard Odier Asset Management (SA) ( email )

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Petit-Lancy
Geneva, 1213
Switzerland

HOME PAGE: http://www.hamelink.com

VU University Amsterdam ( email )

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Amsterdam, ND North Holland 1081 HV
Netherlands

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