Exploring Frequency of Price Overreactions in the Ukrainian Stock Market

Investment Management and Financial Innovations, 15(3), 157-168. Doi:10.21511/imfi.15(3).2018.13

13 Pages Posted: 28 Aug 2018

See all articles by Oleksiy Plastun

Oleksiy Plastun

Sumy State University

Inna Makarenko

National Bank of Ukraine - Ukrainian Academy of Banking of the National Bank of Ukraine

Lyudmila Khomutenko

Sumy State University

Yanina Belinska

University of State Fiscal Service of Ukraine

Maryna Domashenko

Sumy State University

Date Written: June 2018

Abstract

This paper explores the frequency of price overreactions in the Ukrainian stock market by focusing on the PFTS Index over the period 2006–2017 and UX index over the period 2008–2017, as well as some “blue chips” (BAVL, UNAF, MSICH, CEEN) for the period of 2013–2015. Using static approach to detect overreactions, a number of hypotheses are tested: the frequency of price overreactions is informative about crisis events in the economy (H1), can be used for price prediction purposes (H2), and exhibits seasonality (H3). To do this, various statistical tests (both parametric and non-parametric), including correlation analysis, augmented Dickey-Fuller tests (ADF), Granger causality tests, and regression analysis with dummy variables, are carried out. Hypotheses H1 and H2 are confirmed: frequency of price overreactions can be used as a crisis predictor (a sharp increase in the number of overreactions is associated with a crisis period) and could be used to predict stock returns. No seasonality in the overreactions frequency is found. Implications of this research include crisis prediction and stock market prices forecasting and can be used for designing trading strategies.

Keywords: stock market, crisis, frequency analysis, overreactions, frequency of overreactions

JEL Classification: G12, G17, C63

Suggested Citation

Plastun, Oleksiy and Makarenko, Inna and Khomutenko, Lyudmila and Belinska, Yanina and Domashenko, Maryna, Exploring Frequency of Price Overreactions in the Ukrainian Stock Market (June 2018). Investment Management and Financial Innovations, 15(3), 157-168. Doi:10.21511/imfi.15(3).2018.13, Available at SSRN: https://ssrn.com/abstract=3233680

Oleksiy Plastun (Contact Author)

Sumy State University ( email )

Rymskyi-Korsakov str., 2
Sumy, 40000
Ukraine

Inna Makarenko

National Bank of Ukraine - Ukrainian Academy of Banking of the National Bank of Ukraine

57, Petropavlivska str.
Sumy, 40030
Ukraine

Lyudmila Khomutenko

Sumy State University

Rymskyi-Korsakov str., 2
Sumy, 40000
Ukraine

Yanina Belinska

University of State Fiscal Service of Ukraine

Irpin
Ukraine

Maryna Domashenko

Sumy State University

Rymskyi-Korsakov str., 2
Sumy, 40000
Ukraine

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