We examine the behavior of common stock prices after a large change in price occurs during a single trading day and find evidence that the stock market appears to have overreacted, especially in the case of price declines; however, the magnitude of the overreaction is small compared to the bid-ask spreads observed for the individual stocks in the sample. We interpret this finding as being consistent with a market that is efficient after transactions costs are considered.
|Original language||English (US)|
|Number of pages||13|
|Journal||Journal of Financial and Quantitative Analysis|
|State||Published - 1990|
ASJC Scopus subject areas
- Economics and Econometrics