EconPapers    
Economics at your fingertips  
 

On the Frequency of Price Overreactions

Guglielmo Maria Caporale and Alex Plastun ()

No 7011, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper explores the frequency of price overreactions in the US stock market by focusing on the Dow Jones Industrial Index over the period 1990-2017. It uses two different methods (static and dynamic) to detect overreactions and then carries out various statistical tests (both parametric and non-parametric) including correlation analysis, augmented Dickey–Fuller tests (ADF), Granger causality tests, and regression analysis with dummy variables. The following hypotheses are tested: whether or not the frequency of overreactions varies over time (H1), is informative about crises (H2) and/or price movements (H3), and exhibits seasonality (H4). The null cannot be rejected except for H4, i.e. no seasonality is found. On the whole it appears that the frequency of overreactions can provide useful information about market developments and for designing trading strategies.

Keywords: stock markets; anomalies; overreactions; abnormal returns; VIX; frequency of overreactions (search for similar items in EconPapers)
JEL-codes: G12 G17 C63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mst
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
https://www.cesifo-group.de/DocDL/cesifo1_wp7011.pdf (application/pdf)

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:ces:ceswps:_7011

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2019-09-20
Handle: RePEc:ces:ceswps:_7011