Equity Market Reaction to Sharp Price Changes: Evidence from Poland

Rezvanian Rasoul (), Klaczynska Ewelina () and Krysiak Zbigniew ()
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Klaczynska Ewelina: Northeastern Illinois University, United States of America
Krysiak Zbigniew: Warsaw School of Economics, Poland

Scientific Annals of Economics and Business, 2015, vol. 62, issue 2, 169-190

Abstract: We examine investors’ reaction to sharp price changes using two equity market indices in Poland: WIG and WIG20. Using daily market returns for the two indices from April 1991 and April 1994 to November 2012, we identify the event days as the days where market indices exhibited positive or negative daily price changes of 3 percent or more as well as two and three standard deviations from the mean of the market returns. By following the market behaviour through price trend for 30 days after the event days, two conclusions can be reached: (a) The arrival of unexpected news that cause sharp price changes impacts volatility of market indices, and (b) the subsequent price adjustments after the initial sharp price changes take an upward corrective pattern only after the initial negative price changes, but not after positive price changes.

Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:aicuec:v:62:y:2015:i:2:p:169-190:n:3

DOI: 10.1515/aicue-2015-0012

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