Investor Overreaction in Asian and US Stock Markets: Evidence from the 2008 Financial Crisis

Yu-Nan Tai

The International Journal of Business and Finance Research, 2014, vol. 8, issue 3, 71-93

Abstract: This study explored the effectiveness of the contrarian and momentum strategies in the United States stock market-S&P 500 and Chinese stock markets (Taiwan, Hong Kong, & Singapore) both during the 2008 financial crisis and during the pre-crisis period. Additionally, the study examined the similarities and differences between investor behavior (specifically overreaction and underreaction) in western and eastern countries, to assist global investors and fund managers in their decision-making in those regions. The sample period was from May 2003 to October 2012, providing both long-term and short-term analysis and including a non-crisis financial period and a crisis period. This study used an empirical research design and was non-experimental in nature. Results showed that in the short-term, the momentum strategy is significant in Taiwan, Hong Kong, and Singapore, but not in the S&P 500. Additionally, the momentum strategy is not significant in the financial crisis period in the Asian markets. However, the momentum strategy did provide significant profit in the financial crisis period in the U.S. market. The contrarian strategy is significant in the long-term except in the S&P 500, but it is also not significant in the crisis period.

Keywords: 2008 Financial Crisis; Investor Behavior; Trading Strategies; US Market; Asian Markets (search for similar items in EconPapers)
JEL-codes: G01 G15 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:ibf:ijbfre:v:8:y:2014:i:3:p:71-93

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