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Price limits and overreaction in the Athens stock exchange

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  • George Diacogiannis
  • Nikolaos Patsalis
  • Nickolaos Tsangarakis
  • Emanuel Tsiritakis
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    Abstract

    In this paper the phenomenon of short-term overreaction and the existence of price limits on the Athens Stock Exchange (ASE) are examined. An 8% price limit was imposed in August 1992 and remained in place until February 2000. The sample consists of 114 shares traded on the ASE for the period 1995-1998. An event study methodology is used in which the event is defined as an increase or decrease in the stock price that activates the price limit for one, two or three days. The findings confirm the occurrence of short-term overreactions on the ASE during the period under investigation.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100412331313587
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 15 (2005)
    Issue (Month): 1 ()
    Pages: 53-61

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    Handle: RePEc:taf:apfiec:v:15:y:2005:i:1:p:53-61

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    Web page: http://www.tandfonline.com/RAFE20

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    References

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    1. Brown, Stephen J. & Warner, Jerold B., 1985. "Using daily stock returns : The case of event studies," Journal of Financial Economics, Elsevier, Elsevier, vol. 14(1), pages 3-31, March.
    2. De Bondt, Werner F M & Thaler, Richard H, 1987. " Further Evidence on Investor Overreaction and Stock Market Seasonalit y," Journal of Finance, American Finance Association, American Finance Association, vol. 42(3), pages 557-81, July.
    3. De Bondt, Werner F M & Thaler, Richard, 1985. " Does the Stock Market Overreact?," Journal of Finance, American Finance Association, American Finance Association, vol. 40(3), pages 793-805, July.
    4. Kim, Kenneth & Rhee, S Ghon, 1997. " Price Limit Performance: Evidence from the Tokyo Stock Exchange," Journal of Finance, American Finance Association, American Finance Association, vol. 52(2), pages 885-99, June.
    5. Kate Phylaktis & Manolis Kavussanos & Gikas Manalis, 1999. "Price Limits and Stock Market Volatility in the Athens Stock Exchange," European Financial Management, European Financial Management Association, vol. 5(1), pages 69-84.
    6. Brown, Stephen J. & Warner, Jerold B., 1980. "Measuring security price performance," Journal of Financial Economics, Elsevier, Elsevier, vol. 8(3), pages 205-258, September.
    7. Carl R. Chen & David A. Sauer, 1997. "Is Stock Market Overreaction Persistent Over Time?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(1), pages 51-66.
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    Cited by:
    1. Li, Huimin & Zheng, Dazhi & Chen, Jun, 2014. "Effectiveness, cause and impact of price limit—Evidence from China's cross-listed stocks," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 29(C), pages 217-241.
    2. Mark Schaub, 2006. "Investor overreaction to going concern audit opinion announcements," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(16), pages 1163-1170.
    3. Amini, Shima & Gebka, Bartosz & Hudson, Robert & Keasey, Kevin, 2013. "A review of the international literature on the short term predictability of stock prices conditional on large prior price changes: Microstructure, behavioral and risk related explanations," International Review of Financial Analysis, Elsevier, vol. 26(C), pages 1-17.
    4. Chikashi Tsuji, 2006. "Overreactions in the options markets in Japan," Applied Financial Economics Letters, Taylor and Francis Journals, Taylor and Francis Journals, vol. 2(2), pages 115-121, March.
    5. Rezvanian, Rasoul & Turk, Rima A. & Mehdian, Seyed M., 2011. "Investors' reactions to sharp price changes: Evidence from equity markets of the People's Republic of China," Global Finance Journal, Elsevier, vol. 22(1), pages 1-18.

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