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Asymmetric Reaction to Information and Serial Dependence of Short-Run Returns

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  • Pablo Marshall
  • Eduardo Walker

Abstract

This paper studies the daily stock price reaction to new information of portfolios grouped by size quintiles. To that end, cross-correlations, autocorrelations and Dimson beta regressions are analyzed. Based on a sample of shares traded in the Santiago de Chile Stock Exchange for the 1991–1998 period, results show that larger company stock prices—as measured by market capitalization—react to both good and bad news sooner than the smaller ones do. Thus a crossed effect appears, although not as a cascade: only the prices of large firms react earlier than the rest. These effects do not seem to be caused by non-trading. There also are significant asymmetric lagged and cross-effects. Good news has a more pronounced lagged effect than bad news does.

Suggested Citation

  • Pablo Marshall & Eduardo Walker, 2002. "Asymmetric Reaction to Information and Serial Dependence of Short-Run Returns," Journal of Applied Economics, Taylor & Francis Journals, vol. 5(2), pages 273-292, November.
    • Handle: RePEc:taf:recsxx:v:5:y:2002:i:2:p:273-292
    DOI: 10.1080/15140326.2002.12040580
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    Cited by:

    1. Eduardo Sandoval & Rodrigo Saens, 2004. "The Conditional Relationship Between Portfolio Beta and Return: Evidence from Latin America," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 41(122), pages 65-89.
    2. Drakos, Anastassios A., 2016. "Does the relationship between small and large portfolios’ returns confirm the lead–lag effect? Evidence from the Athens Stock Exchange," Research in International Business and Finance, Elsevier, vol. 36(C), pages 546-561.
    3. Cristini, Annalisa & Origo, Federica & Pinoli, Sara, 2017. "The healthy fright of losing a good one for a bad one," Journal of Economic Psychology, Elsevier, vol. 59(C), pages 129-144.
    4. Bley, Jorg, 2011. "Are GCC stock markets predictable?," Emerging Markets Review, Elsevier, vol. 12(3), pages 217-237, September.

    More about this item

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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