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The overreaction hypothesis in the UK market: empirical analysis

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  • Khelifa Mazouz
  • Xiafei Li

Abstract

This article tests the overreaction hypothesis using data from the UK stock market. The study covers a period of 30 years (from 1973 to 2002). The results initially seem to be consistent with the overreaction hypothesis and no obvious seasonal pattern can be identified. Our results do not depend on whether buy-and-hold returns (BHR) or cumulative abnormal returns (CAR) used to compute the returns of the arbitrage portfolio. The overreaction phenomenon is still observable even after controlling for the size effect and the time-varying nature of risk.

Suggested Citation

  • Khelifa Mazouz & Xiafei Li, 2007. "The overreaction hypothesis in the UK market: empirical analysis," Applied Financial Economics, Taylor & Francis Journals, vol. 17(13), pages 1101-1111.
    • Handle: RePEc:taf:apfiec:v:17:y:2007:i:13:p:1101-1111
    DOI: 10.1080/09603100600749303
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    Cited by:

    1. Hisham Farag, 2015. "Long-term Overreaction, Regulatory Policies and Stock Market Anomalies: Evidence from Egypt," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 14(2), pages 112-139, August.
    2. Muhammad Kashif & Sanyah Saad & Imran Umer Chhapra & Farhan Ahmed, 2018. "An Empirical Evidence of Over Reaction Hypothesis on Karachi Stock Exchange (KSE)," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 8(4), pages 449-465, April.
    3. Blackburn, Douglas W. & Cakici, Nusret, 2017. "Overreaction and the cross-section of returns: International evidence," Journal of Empirical Finance, Elsevier, vol. 42(C), pages 1-14.

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