دانلود رایگان مقاله انگلیسی تغییر قیمتها و ادامه قیمت پس از حرکتهای بزرگ قیمت - الزویر 2019

ABSTRACT

We concurrently examine price reversals and price continuations that follow extreme one-day price changes in the period 1986–2015. Consistent with the overreaction and underreaction hypotheses, we find that investors overreact to non-information-based price movements and underreact to public announcements containing firmspecific information. We also find that, consistent with the liquidity hypothesis, smaller firms and firms with lower institutional ownership are more likely to experience price reversals relative to price continuations. The magnitudes of reversals and continuations are also greater for smaller firms and firms with lower institutional ownership. Liquidity improvement following the post-decimalization period led to the reduction in the magnitudes of both, price reversals and continuations. These findings have implications for future debate about underlying reasons of observed price movements and the impact of decimalization on financial markets.

Conclusion

In this study, we extend prior literature and concurrently test the liquidity, under-, and overreaction hypotheses for both price reversals and continuations following large one-day market-adjusted returns, both positive and negative, from 1986 to 2015. We provide support for price reversal explanations based on temporary liquidity pressure (i.e., liquidity shocks) and overreaction. Consistent with the liquidity hypothesis, small stocks and stocks with lower institutional ownership are more likely to experience reversals following a large one-day price drop or increase. Consistent with the overreaction hypothesis, we show that stock prices tend to revert for firms with larger price shocks on and prior to the event day. The presence of relevant information is also shown to have a significant effect on price reversals versus continuations. Specifically, we find that firm-specific information regarding earnings announcements has a significant effect on price continuations. Consistent with the underreaction explanation, the probability of continuation is greater when a large price shock is accompanied by earnings announcements. Furthermore, the magnitudes of reversals and continuations are larger for smaller firms and firms with lower institutional ownership. Consistent with Daniel et al. (1998), we also find that the magnitude of price reversals is greater when one-day price shocks and cumulative returns prior to the event day are larger. These results suggest that markets underreact to news about firms' fundamentals and overreact to non-information-based price movements. Finally, the decrease in the magnitudes of reversals and continuations in the post-decimalization period suggests that greater market liquidity in that period has improved market efficiency.