Extremely large negative ten-day rates of return are followed on average by larger-than-expected positive rates of return over following days. This price adjustment lasts approximately two 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. Copyright 1991 by American Finance Association.
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