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Mean reversals and stock market overreactions: further evidence from India

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  • T.G. Saji

Abstract

'Overreaction hypothesis' of De Bondt and Thaler (1985, 1987) asserts that prior period losers outperform prior period winners in stock markets. In this paper, we test this price reversal behaviour of stock markets in Indian context. The data used comprises monthly prices of Nifty included stocks of National Stock Exchange between January 2008 and December 2016. Consistent with the previous evidence on market overreactions, the study finds losers outperform prior winners over a one to two-year period of portfolio formation. The research observes persistence in investor overreactions to price trends both in upside and downside price movements of Indian stock market during the post financial crisis period.

Suggested Citation

  • T.G. Saji, 2023. "Mean reversals and stock market overreactions: further evidence from India," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 13(4), pages 467-477.
    • Handle: RePEc:ids:afasfa:v:13:y:2023:i:4:p:467-477
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