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The influence of price limits on overreaction in emerging markets: Evidence from the Egyptian stock market

Hisham Farag

The Quarterly Review of Economics and Finance, 2015, vol. 58, issue C, 190-199

Abstract: The main objective of this paper is to investigate the influence of price limits on the overreaction hypothesis in the Egyptian Stock Exchange (EGX) during the period 1999–2010. I find evidence of the overreaction anomaly in the EGX within different price limit regimes. Price reversal is observed two and three days post lower and upper limit hits respectively within the strict price limits regime. However, it occurs after one day only for both lower and upper limit hits within the circuit breakers regime. These results support the directional effect hypothesis as large stock price movements are followed by price reversals in the opposite direction. Moreover, the results support the magnitude effect hypothesis as the larger the initial price movements the greater the subsequent reversals.

Keywords: Overreaction hypothesis; Price reversal; Emerging markets (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:58:y:2015:i:c:p:190-199

DOI: 10.1016/j.qref.2015.01.003

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