Short-Term Return Reversal: The Long and the Short of It

2012 ◽  
Author(s):  
Zhi Da ◽  
Qianqiu Liu ◽  
Ernst Schaumburg
Keyword(s):  
Short Term ◽  
Return Reversal

Fundamental strength and short-term return reversal

2019 ◽  
Vol 52 ◽  
pp. 22-39 ◽  
Author(s):  
Zhaobo Zhu ◽  
Licheng Sun ◽  
Min Chen
Keyword(s):  
Short Term ◽  
Return Reversal

A Closer Look at the Short-Term Return Reversal

2014 ◽  
Vol 60 (3) ◽  
pp. 658-674 ◽  
Author(s):  
Zhi Da ◽  
Qianqiu Liu ◽  
Ernst Schaumburg
Keyword(s):  
Short Term ◽  
Return Reversal

scholarly journals SHORT-TERM OVERREACTION OF ISLAMIC STOCKS TO SPECIFIC EVENTS IN INDONESIA

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Sofina Mujadiddah ◽  
Noer Azam Achsani ◽  
Mohammad Iqbal Irfany
Keyword(s):  
Market Efficiency ◽  
Capital Market ◽  
Information Leakage ◽  
Donald Trump ◽  
Short Term ◽  
Cross Sectional ◽  
Market Inefficiencies ◽  
Testing Method ◽  
Price Reversal ◽  
Return Reversal

Overreaction is a phenomenon caused by stock market inefficiencies and also a reaction to certain events. Das and Krishnakumar (2016) explain that some overreaction phenomena violate the theory of capital market efficiency. As experienced by other stocks , Islamic stocks also probably experience market inefficiencies. This study aims to analyse the phenomenon of overreaction in Islamic stocks, as well as the factors that influence the phenomenon, by using a two-stage testing method: two paired sampling and cross-sectional regression. Two specific events which occurred in 2016-2018, and which were followed by price reversal and return reversal, are studied. The results show that the election of Donald Trump as US President (Event 1) and the bombingsin Surabaya (Event 2) were significant in the overreaction in the winner stock category. The factors that influenced the two events were different. The overreaction to Trump’s election proved to be significantly influenced by information leakage, while the bombings in Surabaya significantly affected the company ownership category . The results indicate that Islamic stocks continue to have several transactions which areprohibited by the DSN MUI fatwa in the short term.

scholarly journals Decomposing Short-Term Return Reversal

2011 ◽  
Author(s):  
Zhi Da ◽  
Qianqiu Liu ◽  
Ernst Schaumburg
Keyword(s):  
Short Term ◽  
Return Reversal

Return reversal effect in Shanghai A share market

2019 ◽  
Vol 45 (6) ◽  
pp. 698-715 ◽  
Author(s):  
Krishna Reddy ◽  
Muhammad Ali Jibran Qamar ◽  
Marriam Rao
Keyword(s):  
Stock Market ◽  
Stock Markets ◽  
Abnormal Returns ◽  
Short Term ◽  
Content Type ◽  
Reversal Effect ◽  
Chinese Stock Markets ◽  
Developed Stock Markets ◽  
Return Reversal

Purpose The existing literature about return reversal effect in Chinese stock markets is inconclusive and controversial. Therefore, the purpose of this paper is to investigate the presence of return reversal effect in the Shanghai A stock market. Design/methodology/approach The authors used the late-stage contrarian strategy of Malin and Bornholt (2013) for the period March 2011‒March 2016. Findings The results show that there is a long-term return reversal effect in the Shanghai A stock market for the period March 2011‒March 2016. When portfolios are in the formation period (P=24 months), the excess returns are significant in the holding period, Q=6, 9, 12, 24 months. Further, there is also a significant short-term momentum effect in the Shanghai A stock market. For the robustness check, a new reversal factor was introduced into the Fama‒French three-factor model. Results show that portfolios have a smaller size and have lower book-to-market ratios; the return reversal factor explains a portion of the abnormal returns and coefficient of the reversal effect is significant. Research limitations/implications The authors caution readers from generalizing the findings of this study, as the sample is small and the focus is only on A stocks listed on the Shanghai Stock Exchange. Originality/value The present research expands the current literature by providing a comprehensive information about the presence of the long-term and short-term return reversal effects in Shanghai A stock market. Furthermore, the Chinese stock markets have distinctive features in comparison to the developed stock markets in terms of government control, institutional structure, liquidity, cultural background, etc. Such differences affect the pattern in stock returns compared with those observed in developed stock markets. Contrary to previous studies, the present study also accounts for robustness checks. Finally, it also evaluates the possible reasons for the return reversal effect in the Shanghai market.

scholarly journals Price Shocks, News Disclosures, and Asymmetric Drifts

2014 ◽  
Vol 89 (5) ◽  
pp. 1805-1834 ◽  
Author(s):  
Hai Lu ◽  
Kevin Q. Wang ◽  
Xiaolu Wang
Keyword(s):  
Stock Returns ◽  
Stock Price ◽  
Abnormal Returns ◽  
Corporate Disclosure ◽  
Price Shocks ◽  
Short Term ◽  
Momentum Strategy ◽  
Economic Significance ◽  
Return Reversal ◽  
Investor Disagreement

ABSTRACT Motivated by investor disagreement and corporate disclosure literatures, we examine how stock price shocks affect future stock returns. We find that both large short-term price drops and hikes are followed by negative abnormal returns over the subsequent year, consistent with the conjecture that price shocks are useful indicators of intertemporal spikes in investor disagreement and investor opinion converges gradually. The asymmetric drifts involve return continuation for negative price shocks versus return reversal for positive price shocks, and are in sharp contrast to the general findings of symmetric drifts in corporate event studies. Moreover, price shocks associated with public news events are followed by significantly weaker downward drifts, suggesting that news disclosures mitigate disagreement-induced overpricing. Examining the dynamics of a disagreement proxy during and after price shocks, we provide further evidence for the disagreement hypothesis. The economic significance of the price shock effect is illustrated with a revised momentum strategy that generates an annualized abnormal return of 16.92 percent.

Corporate investment, short-term return reversal, and stock liquidity

2018 ◽  
Vol 39 ◽  
pp. 68-83 ◽  
Author(s):  
Moonsoo Kang ◽  
S. Khaksari ◽  
Kiseok Nam
Keyword(s):  
Corporate Investment ◽  
Short Term ◽  
Stock Liquidity ◽  
Return Reversal

scholarly journals The effect of short-term return reversals on momentum profits

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Myounghwa Sim ◽  
Hee-Eun Kim
Keyword(s):  
Stock Market ◽  
Term Structure ◽  
Stock Return ◽  
Short Term ◽  
Past Performance ◽  
Momentum Profits ◽  
Korean Stock Market ◽  
Return Reversal ◽  
Return Reversals

The authors investigate the effect of a short-term stock return reversal on the term structure of momentum profits in the Korean stock market following Goyal and Wahal (2015). Their empirical findings show that the term structure of momentum is more pronounced when a return reversal lasts up to two months but is substantially weakened when past performance over the last two months is not taken into account for portfolio formation. Their evidence suggests that the term structure of momentum profitability arises primarily from a carryover of the return reversal from the previous two months.

Clientele Change, Liquidity Shock, and the Return on Financially Distressed Stocks

2010 ◽  
Vol 45 (1) ◽  
pp. 27-48 ◽  
Author(s):  
Zhi Da ◽  
Pengjie Gao
Keyword(s):  
Empirical Evidence ◽  
Default Risk ◽  
Abnormal Returns ◽  
Small Subset ◽  
Short Term ◽  
Financially Distressed ◽  
Liquidity Shock ◽  
Return Reversal ◽  
Return Reversals

AbstractWe show that the abnormal returns on high default risk stocks documented by Vassalou and Xing (2004) are driven by short-term return reversals rather than systematic default risk. These abnormal returns occur only during the month after portfolio formation and are concentrated in a small subset of stocks that had recently experienced large negative returns. Empirical evidence supports the view that the short-term return reversal arises from a liquidity shock triggered by a clientele change.

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