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Stock price reversals following end-of-the-day price moves

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  • Kudryavtsev, Andrey

Abstract

In the present study, I explore the dynamics of the interday stock price reversals. Employing the intraday price data on thirty stocks currently making up the Dow Jones Industrial Index, I document that daily stock returns tend to be higher following the days with relatively large high-to-close price differences (price decreases at the end of the day), and lower following the days with relatively large low-to-close price differences (price increases at the end of the day). Based on this finding, I construct five daily-adjusted portfolios yielding significantly positive returns.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 118 (2013)
Issue (Month): 1 ()
Pages: 203-205

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Handle: RePEc:eee:ecolet:v:118:y:2013:i:1:p:203-205

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Intraday stock prices; Overreaction; Stock price reversals;

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References

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  1. De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, vol. 40(3), pages 793-805, July.
  2. Bruce N. Lehmann, 1988. "Fads, Martingales, and Market Efficiency," NBER Working Papers 2533, National Bureau of Economic Research, Inc.
  3. Jegadeesh, Narasimhan, 1990. " Evidence of Predictable Behavior of Security Returns," Journal of Finance, American Finance Association, vol. 45(3), pages 881-98, July.
  4. Cox, Don R & Peterson, David R, 1994. " Stock Returns Following Large One-Day Declines: Evidence on Short-Term Reversals and Longer-Term Performance," Journal of Finance, American Finance Association, vol. 49(1), pages 255-67, March.
  5. Lehmann, Bruce N, 1990. "Fads, Martingales, and Market Efficiency," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 1-28, February.
  6. Nam, Kiseok & Pyun, Chong Soo & Avard, Stephen L., 2001. "Asymmetric reverting behavior of short-horizon stock returns: An evidence of stock market overreaction," Journal of Banking & Finance, Elsevier, vol. 25(4), pages 807-824, April.
  7. Atkins, Allen B. & Dyl, Edward A., 1990. "Price Reversals, Bid-Ask Spreads, and Market Efficiency," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 25(04), pages 535-547, December.
  8. Adam Zawadowski & Gyorgy Andor & Janos Kertesz, 2006. "Short-term market reaction after extreme price changes of liquid stocks," Quantitative Finance, Taylor & Francis Journals, vol. 6(4), pages 283-295.
  9. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 15(2), pages 457-510.
  10. Robert J. Shiller, 1984. "Stock Prices and Social Dynamics," Cowles Foundation Discussion Papers 719R, Cowles Foundation for Research in Economics, Yale University.
  11. Grant, James L. & Wolf, Avner & Yu, Susana, 2005. "Intraday price reversals in the US stock index futures market: A 15-year study," Journal of Banking & Finance, Elsevier, vol. 29(5), pages 1311-1327, May.
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Cited by:
  1. Andrey Kudryavtsev, 2013. "Think About Tomorrow Morning: Opening Stock Returns May Show Reversals," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 16(50), pages 51-64, December.

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