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An event study of price movements following realized jumps

Author

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  • Hossein Asgharian
  • Mia Holmfeldt
  • Marcus Larson

Abstract

Price jumps are mostly related to investor reactions to unexpected extreme news. We perform an event study of price movements after jumps to analyse if investors' reactions are affected by psychological biases. We employ recent non-parametric methods based on intraday returns to separate large price movements that are related to unexpected news from those merely caused by periods of high volatility. In general, we find evidence for irrational pricing, which can be associated with investors' optimistic behavior in a bull market and the pessimism prevailing in a bear market. Furthermore, our analysis confirms the conjecture that small firms are more subject to speculative trading than large firms.

Suggested Citation

  • Hossein Asgharian & Mia Holmfeldt & Marcus Larson, 2011. "An event study of price movements following realized jumps," Quantitative Finance, Taylor & Francis Journals, vol. 11(6), pages 933-946.
  • Handle: RePEc:taf:quantf:v:11:y:2011:i:6:p:933-946
    DOI: 10.1080/14697680903369518
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    References listed on IDEAS

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    Cited by:

    1. Wang, Kun Tracy & Wang, Wanbin Walter, 2017. "Competition in the stock market with asymmetric information," Economic Modelling, Elsevier, vol. 61(C), pages 40-49.

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