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Overreaction or Fundamentals: Some Lessons from Insiders' Response to the Market Crash of 1987
Author(s) -
SEYHUN H. NEJAT
Publication year - 1990
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1990.tb03719.x
Subject(s) - crash , surprise , business , stock (firearms) , stock market crash , monetary economics , stock market , economics , engineering , psychology , history , computer science , social psychology , mechanical engineering , context (archaeology) , archaeology , programming language
This paper shows that i) the Crash was a surprise to corporate insiders; ii) insiders became buyers of stock in record numbers immediately following the Crash; iii) stocks that declined more during the Crash were also purchased more by insiders; and iv) stocks that were purchased more extensively by insiders during October 1987 showed larger positive returns in 1988. The overall evidence suggests that overreaction was an important part of the Crash.