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9315127.pdf
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The authors rank all stocks traded on the NYSE by their past three year cumulative return. Subse- quent abnormal performance turns out to be higher for prior “losers stocks having experienced the poorest past performance. Over the sub- sequent three years, the bottom decile portfolio yields an abnor
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  • The authors rank all stocks traded on the NYSE by their past three year cumulative return.
  • Subse- quent abnormal performance turns out to be higher for prior “losers
  • stocks having experienced the poorest past performance. Over the sub- sequent three years, the bottom decile portfolio yields an abnormal return 8% higher than that of the top decile portfolio: the prior winners.
  • This stock return reversal suggests that part of an initial overweighing of nega- tive (positive) stock information, driving prices below (over) their rational levels is subsequently corrected
  • The overreaction phenomenon has been confirmed several times on the stock market (De Bondt and Thaler, 1987 ; Chopra, Lakonishok, and Rit- ter, 1992), but also for international stock market indices (Chui, Titman, and Wei, 2000 ; Bhojraj and Swaminathan, 2001), the gold market (Cutler, Poterba, and Summers, 1991) and the options market (Poteshman, ...

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