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The Predictability of Short-Horizon Stock Returns

Author

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  • Bryan Mase

Abstract

This examines the predictability of short-horizon stock returns in the UK. We show that the subsequent return reversal of previous extreme performers is unlikely to be caused by either lead-lag effects or inventory imbalances, the most likely explanation being market overreaction. A market or trading based explanation is reinforced by the finding that these return reversals are asymmetric, being less significant after bad news. Further, we find that the lower transacting stocks exhibit the stronger return reversals, in direct contrast to both the existing US evidence and the implication that liquidity effects can explain the return reversals. JEL Classification: G10, G11, G12

Suggested Citation

  • Bryan Mase, 1999. "The Predictability of Short-Horizon Stock Returns," Review of Finance, European Finance Association, vol. 3(2), pages 161-173.
  • Handle: RePEc:oup:revfin:v:3:y:1999:i:2:p:161-173.
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    File URL: http://hdl.handle.net/10.1023/A:1009859611850
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    Cited by:

    1. Markus Glaser & Martin Weber, 2003. "Momentum and Turnover: Evidence from the German Stock Market," Schmalenbach Business Review (sbr), LMU Munich School of Management, vol. 55(2), pages 108-135, April.

    More about this item

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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