Short-Term Reversal

Nusret Cakici and Kudret Topyan

Chapter Chapter 7 in Risk and Return in Asian Emerging Markets, 2014, pp 91-103 from Palgrave Macmillan

Abstract: Abstract Short-term reversal is a well-documented market anomaly that was first noted by Fama (1965). Following Jegadeesh (1990), Jegadeesh and Titman (1995b), and Lehmann (1990), the reversal variable for each stock in month t is defined as the return of the same stock over the previous month. Jegadeesh (1990) shows that for the period 1934–1987, short-term reversal strategy yielded approximately 2 percent extra return per month. Profits based on short-term reversal strategy may be explained as the reflection of the investors’ initial price overreaction to information (see, for example, Shiller, 1984; Stiglitz, 1989; Subrahmanyam, 2005), or as the price pressure connected to liquidity shocks (see, for example, Grossman and Miller, 1988; Jegadeesh and Titman, 1995a; Pastor and Stambaugh, 2003).

Keywords: Stock Return; Trading Cost; Return Volatility; Monthly Return; Large Stock (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1057/9781137359070_7

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