Overreaction to extreme market events and investor sentiment

Pedro Piccoli and Mo Chaudhury

Applied Economics Letters, 2018, vol. 25, issue 2, 115-118

Abstract: This article investigates the role of investor psychology, captured here by investor sentiment index, in driving individual stock price reactions to extreme movements in the broader market. In addition to confirming prior evidence of overreaction, we find much stronger overreaction when investor sentiment is low rather than high. This is consistent with the role of the contrast dimension of an uncommon event, suggested in the psychology literature, over and above the emotion of surprise it brings about. In a low sentiment environment, the contrast is sharper and hence leads to stronger overreaction.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2017.1302052 (text/html)
Access to full text is restricted to subscribers.

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:taf:apeclt:v:25:y:2018:i:2:p:115-118

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2017.1302052

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().