Premium
The Reversal of Large Stock‐Price Decreases
Author(s) -
BREMER MARC,
SWEENEY RICHARD J.
Publication year - 1991
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.1540-6261.1991.tb02684.x
Subject(s) - economics , stock price , stock (firearms) , monetary economics , phenomenon , econometrics , stock market , financial economics , efficient market hypothesis , biology , series (stratigraphy) , geography , physics , paleontology , quantum mechanics , archaeology , horse
Extremely large negative 10‐day rates of return are followed on average by larger‐than‐expected positive rates of return over following days. This price adjustment lasts approximately 2 days and is observed in a sample of firms that is largely devoid of methodological problems that might explain the reversal phenomenon. While perhaps not representing abnormal profit opportunities, these reversals present a puzzle as to the length of the price adjustment period. Such a slow recovery is inconsistent with the notion that market prices quickly reflect relevant information.