Testing the Overreaction Hypothesis in the Mexican Stock Market

Contaduría y Administración 65 (1) 2020, 1-23

23 Pages Posted: 14 Jun 2021

See all articles by Jaime González Maiz Jiménez

Jaime González Maiz Jiménez

Universidad de las Américas Puebla (UDLAP)

Edgar Ortiz

Social and Political Sciences Faculty

Date Written: January 17, 2019

Abstract

The objective of this work is to test the overreaction hypothesis in the Mexican Stock Market for the period of 2002-2015, using monthly data and applying the Cumulative Average Residuals (CAR) methodology via the CAPM model and the three-factor model proposed by Fama and French. The CAR model is applied to test how winner and loser portfolios perform during the period under analysis. Overall, the evidence shows that average CAR for the loser portfolio is 0.706%, whereas CAR for the winner portfolio is 0.364%, and that are statistically different; nevertheless, both portfolios are co-integrated. This research contributes to the financial literature identifying overreaction in the Mexican Stock Market during the period examined.

Keywords: Overreaction; Cumulative average residuals; Mexican stock market

JEL Classification: G15, G41

Suggested Citation

Jiménez, Jaime González Maiz and Ortiz, Edgar, Testing the Overreaction Hypothesis in the Mexican Stock Market (January 17, 2019). Contaduría y Administración 65 (1) 2020, 1-23, Available at SSRN: https://ssrn.com/abstract=3858199

Jaime González Maiz Jiménez

Universidad de las Américas Puebla (UDLAP) ( email )

Ex Hacienda Santa Catarina Mártir S/N
San Andrés Cholula, Puebla 72810
Mexico

Edgar Ortiz (Contact Author)

Social and Political Sciences Faculty ( email )

México

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