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Stock Returns following Large One‐Day Declines: Evidence on Short‐Term Reversals and Longer‐Term Performance
Author(s) -
COX DON R.,
PETERSON DAVID R.
Publication year - 1994
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.1540-6261.1994.tb04428.x
Subject(s) - economics , market liquidity , stock (firearms) , term (time) , stock price , monetary economics , financial economics , series (stratigraphy) , geography , paleontology , physics , quantum mechanics , biology , archaeology
We examine stock returns following large one‐day price declines and find that the bid‐ask bounce and the degree of market liquidity explain short‐term price reversals. Further, we do not find evidence consistent with the overreaction hypothesis. We observe that securities with large one‐day price declines perform poorly over an extended time horizon.