Investor Reaction to Corporate Event Announcements: Underreaction or Overreaction?
AbstractTwo conflicting behavioral models, underreaction and overreaction, have been proposed to explain long-run abnormal returns following a variety of corporate events. We test hypotheses that distinguish between these two models. We find that across four different corporate events, long-run abnormal returns exhibit a pattern that is most consistent with investor underreaction to short-term information available prior to the event and to the information conveyed by the event itself. The pattern in long-run abnormal returns is inconsistent with the overreaction model as well as with a model that postulates investor underreaction to short-term information and overreaction to long-term trends.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 77 (2004)
Issue (Month): 2 (April)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JB/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Mehdian, Seyed & Nas, Tevfik & Perry, Mark J., 2008. "An examination of investor reaction to unexpected political and economic events in Turkey," Global Finance Journal, Elsevier, vol. 18(3), pages 337-350.
- Samaniego Alcántar Ángel & Trejo Pech Carlos Omar & Mongrut Samuel & Fuenzalida Darcy, 2012. "Comportamiento del inversionista a diferentes niveles de inversión en I+D," Contaduría y Administración:Revista Internacional, Accounting and Management: International Journal, vol. 57(3), pages 97-114, julio-sep.
- Nguyen, Pascal, 2005. "Market underreaction and predictability in the cross-section of Japanese stock returns," Journal of Multinational Financial Management, Elsevier, Elsevier, vol. 15(3), pages 193-210, July.
- Ramnath, Sundaresh & Rock, Steve & Shane, Philip, 2008. "The financial analyst forecasting literature: A taxonomy with suggestions for further research," International Journal of Forecasting, Elsevier, Elsevier, vol. 24(1), pages 34-75.
- Jeetendra Dangol, 2008. "Unanticipated Political Events and Stock Returns: An Event Study," NRB Economic Review, Nepal Rastra Bank, Research Department, Nepal Rastra Bank, Research Department, vol. 20, pages 86-110, April.
- Perotti, Pietro & Rindi, Barbara, 2010. "Market makers as information providers: The natural experiment of STAR," Journal of Empirical Finance, Elsevier, Elsevier, vol. 17(5), pages 895-917, December.
- G. Geoffrey Booth & Juha-Pekka Kallunki & Petri Sahlström & Jaakko Tyynelä, 2011. "Foreign vs domestic investors and the post-announcement drift," International Journal of Managerial Finance, Emerald Group Publishing, Emerald Group Publishing, vol. 7(3), pages 220-237, June.
- Cohen, Lauren & Lou, Dong, 2012. "Complicated firms," Journal of Financial Economics, Elsevier, Elsevier, vol. 104(2), pages 383-400.
- Lauren Cohen & Dong Lou, 2011. "Complicated Firms," FMG Discussion Papers, Financial Markets Group dp683, Financial Markets Group.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.