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Short-Term Reversal

In: Risk and Return in Asian Emerging Markets

Author

Listed:
  • Nusret Cakici
  • Kudret Topyan

Abstract

Short-term reversal is a well-documented market anomaly that was first noted by Fama (1965). Following Jegadeesh (1990), Jegadeesh and Titman (1995b), and Lehmann (1990), the reversal variable for each stock in month t is defined as the return of the same stock over the previous month. Jegadeesh (1990) shows that for the period 1934–1987, short-term reversal strategy yielded approximately 2 percent extra return per month. Profits based on short-term reversal strategy may be explained as the reflection of the investors’ initial price overreaction to information (see, for example, Shiller, 1984; Stiglitz, 1989; Subrahmanyam, 2005), or as the price pressure connected to liquidity shocks (see, for example, Grossman and Miller, 1988; Jegadeesh and Titman, 1995a; Pastor and Stambaugh, 2003).

Suggested Citation

  • Nusret Cakici & Kudret Topyan, 2014. "Short-Term Reversal," Palgrave Macmillan Books, in: Risk and Return in Asian Emerging Markets, chapter 0, pages 91-103, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-35907-0_7
    DOI: 10.1057/9781137359070_7
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    Cited by:

    1. Zaremba, Adam & Bilgin, Mehmet Huseyin & Long, Huaigang & Mercik, Aleksander & Szczygielski, Jan J., 2021. "Up or down? Short-term reversal, momentum, and liquidity effects in cryptocurrency markets," International Review of Financial Analysis, Elsevier, vol. 78(C).

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