Differences of Opinion and Price Reversals: Evidence from the Taiwan Stock Exchange

Chu-Chun Cheng () and Yen-Sheng Huang ()
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Chu-Chun Cheng: Department of International Trade, Takming University of Science and Technology, No. 56, Sec. 1, Huanshan Rd., Neihu, Taipei 11451, Taiwan
Yen-Sheng Huang: Department of Business Administration, National Taiwan University of Science and Technology, Taipei, Taiwan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2015, vol. 18, issue 03, 1-23

Abstract: This paper examines the impact of differences of opinion (DIFOPN) on long-term price reversals using all of the common stocks listed on the Taiwan Stock Exchange over the period of 1990–2008. We choose winners and losers ranked by their cumulative abnormal returns (CARs) over the three-year formation period. The performance of the winners and losers is evaluated over the subsequent one-year holding periods. The empirical results indicate that DIFOPN are generally positively related to price reversals in the holding period for both winners and losers. When DIFOPN are measured by the financial analysts' forecasts of earnings per share and by the standard deviation of stock returns, the association between DIFOPN and price reversals is significantly different from zero. This relationship is robust when such control variables as market-to-book ratios, size, and beta are included.

Keywords: Overreaction; differences of opinion (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (2)

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DOI: 10.1142/S0219091515500150

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