Open AccessStock Market Behavior after Large Price Changes and Winner-Loser Effect
Author(s) -
Muhammad Shahid Rasheed,
Syed Zulfiqar Ali Shah,
Muhammad Fayyaz Sheikh
Publication year - 2021
Publication title -
asia proceedings of social sciences
Language(s) - English
Resource type - Journals
eISSN - 2663-6638
pISSN - 2663-662X
DOI - 10.31580/apss.v7i2.1786
Subject(s) - unobservable , economics , stock exchange , stock (firearms) , disposition effect , econometrics , monetary economics , financial economics , biology , finance , mechanical engineering , paleontology , context (archaeology) , engineering
This study examines the behavior of stock prices following large price changes. It also examines the presence of disposition prone investors and effect of size on stock returns. The study uses daily prices data from Pakistan Stock Exchange (Formerly, Karachi Stock Exchange (KSE)) for the period of January 2001 to July 2012. Our findings suggest that winners perform better than losers after experiencing large price shocks thus showing a momentum behavior. This also suggests that most of the investors in KSE behave rationally and we do not find any evidence of disposition effect in KSE. Further, pooled regression estimates show that size is positively related to post-event abnormal returns. The fixed effect model shows the presence of unobservable firm-specific and time specific effects that account for price continuation.