An event study of price movements following realized jumps

Hossein Asgharian, Mia Holmfeldt and Marcus Larson

Quantitative Finance, 2011, vol. 11, issue 6, 933-946

Abstract: Price jumps are mostly related to investor reactions to unexpected extreme news. We perform an event study of price movements after jumps to analyse if investors' reactions are affected by psychological biases. We employ recent non-parametric methods based on intraday returns to separate large price movements that are related to unexpected news from those merely caused by periods of high volatility. In general, we find evidence for irrational pricing, which can be associated with investors' optimistic behavior in a bull market and the pessimism prevailing in a bear market. Furthermore, our analysis confirms the conjecture that small firms are more subject to speculative trading than large firms.

Keywords: Behavioral finance; Empirical asset pricing; Volatility modelling; Financial econometrics; Anomalies in prices; Quantitative finance (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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DOI: 10.1080/14697680903369518

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