Short-term stock price reversals after extreme downward price movements

Alexandru Rif and Sebastian Utz

The Quarterly Review of Economics and Finance, 2021, vol. 81, issue C, 123-133

Abstract: We studied the intraday effects of return overreactions around extreme negative one-minute interval returns of Nasdaq100 constituents based on nanosecond data. An extreme negative one-minute interval return is defined as the lowest return that occurs once in 1,000 one-minute intervals. We document that 31% of such an extreme one-minute interval's return is reversed in the subsequent trading minute. The relative magnitude of the reversal after extreme negative one-minute interval returns is particularly high for the 20% most liquid and the 20% largest firms of our sample.

Keywords: Stock price reversal; High-frequency trading; Stock price crash (search for similar items in EconPapers)
JEL-codes: G12 G14 L11 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:81:y:2021:i:c:p:123-133

DOI: 10.1016/j.qref.2021.05.004

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