Stock price reaction following large one-day price changes: UK evidence

Khelifa Mazouz, Nathan L. Joseph and Joulmer Joulmer

Journal of Banking & Finance, 2009, vol. 33, issue 8, 1481-1493

Abstract: We examine the short-term price reaction of 424 UK stocks to large one-day price changes. Using the GJR-GARCH(1,1), we find no statistical difference amongst the cumulative abnormal returns (CARs) of the Single Index, the Fama-French and the Carhart-Fama-French models. Shocks [greater-or-equal, slanted]5% are followed by a significant one-day CAR of 1% for all the models. Whilst shocks [less-than-or-equals, slant]-5% are followed by a significant one-day CAR of -0.43% for the Single Index, the CARs are around -0.34% for the other two models. Positive shocks of all sizes and negative shocks [less-than-or-equals, slant]-5% are followed by return continuations, whilst the market is efficient following larger negative shocks. The price reaction to shocks is unaffected when we estimate the CARs using the conditional covariances of the pricing variables.

Keywords: Price shocks Overreaction Return continuations Pricing factors GJR-GARCH(1; 1) Conditional covariances (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378-4266(09)00043-0
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:33:y:2009:i:8:p:1481-1493

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().