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Reversal of 3-day losers and continuation of 3-day winners on the NASDAQ

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  • Gutierrez, Jose

Abstract

Using only the 200 large-cap securities that make up the NYSE 100 and NASDAQ 100, this study investigates 130 randomly selected formation periods from January 2000 through December 2012. During these formation periods, the three worst and three best performing stocks (based on excess return) are flagged. Once flagged, the subsequent 10-day holding period excess returns are calculated. Results indicate that NYSE securities demonstrate significant return reversal, but not return momentum. Conversely, the worst performing NASDAQ securities demonstrate return reversal, whereas the best performing NASDAQ securities demonstrate return momentum. Results are robust to the number of best and worst stocks that are flagged. Results are also robust to other combinations of formation and holding period lengths.

Suggested Citation

  • Gutierrez, Jose, 2016. "Reversal of 3-day losers and continuation of 3-day winners on the NASDAQ," Review of Financial Economics, Elsevier, vol. 30(C), pages 68-73.
    • Handle: RePEc:eee:revfin:v:30:y:2016:i:c:p:68-73
    DOI: 10.1016/j.rfe.2016.07.001
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    More about this item

    Keywords

    Market anomaly; Momentum; Return reversal; Return persistence; Trading strategy;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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