IDEAS home Printed from https://ideas.repec.org/a/usm/journl/aamjaf00702_103-119.html
   My bibliography  Save this article

Stock Market Overreaction and Trading Volume: Evidence from Malaysia

Author

Listed:
  • Ruhani Ali

    (Graduate School of Business, Universiti Sains Malaysia, 11800 USM Pulau Pinang)

  • Zamri Ahmad

    (School of Management, Universiti Sains Malaysia, 11800 USM Pulau Pinang)

  • Shangkari V. Anusakumar

    (School of Management, Universiti Sains Malaysia, 11800 USM Pulau Pinang)

Abstract

We investigate the stock market overreaction in Bursa Malaysia from January 2000 to October 2010 using weekly data. We find that winner portfolios tend to have negative returns whereas loser portfolios have positive returns for various holding periods from 1 to 52 weeks. Loser stocks experience more persistent and stronger return reversals than winner stocks. The evidence implies that a lower level of overreaction exists for winner stocks. Overall, a loser-winner portfolio yields highly significant returns. Comparing the overreaction of low-, medium- and high-volume stocks, we find that low volume stocks experience more consistent and larger return reversals. Therefore, trading volume is inversely related to overreaction. We also document more persistent overreaction for loser than winner stocks for all volume categories. The results suggest that investor may be able to obtain significant profits by implementing a short term contrarian strategy focused on low volume stocks.

Suggested Citation

  • Ruhani Ali & Zamri Ahmad & Shangkari V. Anusakumar, 2011. "Stock Market Overreaction and Trading Volume: Evidence from Malaysia," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 7(2), pages 103-119.
    • Handle: RePEc:usm:journl:aamjaf00702_103-119
    as

    Download full text from publisher

    File URL: http://web.usm.my/journal/aamjaf/vol7-2-2011/7-2-4.pdf
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Riza Praditha & Haliah & Abdul Hamid Habbe & Yohanis Rura, 2019. "Market Overreaction on LQ45 Stock Index before and after Asian Games 2018," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 9(2), pages 117-125, April.
    2. Asiya Sohail & Attiya Yasmin Javid, 2014. "The Global Financial Crisis and Investors’ Behaviour; Evidence from the Karachi Stock Exchange," PIDE-Working Papers 2014:106, Pakistan Institute of Development Economics.
    3. Jasman Tuyon & Zamri Ahmad & Hylmee Matahir, 2016. "The Roles of Investor Sentiment in Malaysian Stock Market," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 12(Suppl. 1), pages 43-75.
    4. Jasman Tuyon & Zamri Ahmada, 2016. "Behavioural finance perspectives on Malaysian stock market efficiency," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 16(1), pages 43-61, March.
    5. Shangkari V. Anusakumar & Ruhani Ali & Hooy Chee Wooi, 2017. "The Effect of Investor Sentiment on Stock Returns: Insight from Emerging Asian Markets," Asian Academy of Management Journal of Accounting and Finance (AAMJAF), Penerbit Universiti Sains Malaysia, vol. 13(1), pages 159-178.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:usm:journl:aamjaf00702_103-119. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journal Division, Penerbit Universiti Sains Malaysia (email available below). General contact details of provider: https://edirc.repec.org/data/aammmea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.