Abnormal Returns After Large Stock Price Changes: Evidence from Asia-Pacific Markets

International Financial Review, Vol. 8, pp. 205-227

36 Pages Posted: 17 Oct 2007 Last revised: 24 Mar 2009

See all articles by Tho Nguyen

Tho Nguyen

Australian School of Business; Groupe ESC Rouen

Vu Thang Long Pham

Osaka University - School of Economics

Thuy Duong To

University of New South Wales, Sydney; Financial Research Network (FIRN)

Abstract

This paper aims to expand the overreaction literature by examining whether the price reversals occur in the short-term period, i.e. three days, and longer term period, i.e. up to twenty days, following large one-day price changes in Asia-Pacific markets over the period 2001 to 2005. Our results based on firm data in three Asia-Pacific markets, namely, Australia, Japan and Vietnam, and static and dynamic measures of large price changes indicate the followings. First, stock prices tend to reverse over the short-term period after large price changes. Second, in the case of large price declines defined by arbitrary trigger values, investors may earn profit from exploiting the phenomena of price reversals; however, the profit is not large enough to exploit since it is less than the profit from passive funds. This result is supportive of the weak form of efficient market hypothesis. Third, we find mixed evidence of long run price reversal across markets. Forth, market conditions, i.e. bear or bull, may not explain the magnitude of price reversals. Finally, the dynamic measures of large price changes based on individual firms provide more consistent evidence across markets, which is supportive of short-term price reversals and overreaction hypothesis. This evidence exists in the emerging market of Vietnam as well as developed Australian and Japanese markets.

Keywords: Event Studies, Information and Market Efficiency, Overreaction, Price Reversals, Asia - Pacific stock markets, Vietnam, Australia, Japan

JEL Classification: G12, G14

Suggested Citation

Nguyen, Tho and Pham, Vu Thang Long and To, Thuy Duong, Abnormal Returns After Large Stock Price Changes: Evidence from Asia-Pacific Markets. International Financial Review, Vol. 8, pp. 205-227. Available at SSRN: https://ssrn.com/abstract=989909

Tho Nguyen (Contact Author)

Australian School of Business ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

Groupe ESC Rouen ( email )

France

Vu Thang Long Pham

Osaka University - School of Economics ( email )

1-7 Machikaneyama
Toyonaka
Osaka 560
Japan

Thuy Duong To

University of New South Wales, Sydney ( email )

School of Banking and Finance,
University of New South Wales
Sydney, 2052
Australia
61295855865 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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