Abnormal Returns after Large Increases in Stock Prices. A Comparison between Turkish Sport Index and Turkish Banks

Alp Polat, Yucel Turker and Huseyin Kose
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Alp Polat: Bilecik Seyh Edebali University
Yucel Turker: Eskisehir Osmangazi University
Huseyin Kose: Anadolu University

Business, Management and Economics Research, 2016, vol. 2, issue 11, 180-185

Abstract: Large price changes can generate abnormal returns owing to under-reaction and over-reaction behavior of individuals. Â This behaviors result in price continuation or price reversal in short term. The effects of large price changes can be observed in Post-shock period with abnormal returns. The aim of the study is to explore the abnormal returns after positive large price changes in Turkish stock market. Turkish sport index is investigated due to its relative negligence in literature. Turkish banking sector is also analyzed in order to compare results. The large price shocks indicates price changes which exceed two standard deviation which is calculated from windows prior the event. The abnormal returns are calculated by means which are the averages of returns of windows days prior the market shocks. The findings of the study show that the sport index support under-reaction theory and provide price continuation with average 2.5% positive cumulative abnormal returns in post event period. However, banking sector stocks support efficient market behavior and only two of seven banks can generate positive returns at the end of post event period with average 0,6 % and 0.1% which are highly small when compare to the post-event abnormal returns of the Borsa Istanbul sport index.

Keywords: Price shocks; Under-reaction; Turkish banks; Large stock changes; Borsa Istanbul sport index. (search for similar items in EconPapers)
Date: 2016
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