Arbeitspapier
Short-Term Price Overreactions: Identification, Testing, Exploitation
This paper examines short-term price reactions after one-day abnormal price changes and whether they create exploitable profit opportunities in various financial markets. A t-test confirms the presence of overreactions and also suggests that there is an inertia anomaly, i.e. after an overreaction day prices tend to move in the same direction for some time. A trading robot approach is then used to test two trading strategies aimed at exploiting the detected anomalies to make abnormal profits. The results suggest that a strategy based on counter-movements after overreactions does not generate profits in the FOREX and the commodity markets, but it is profitable in the case of the US stock market. By contrast, a strategy exploiting the inertia anomaly produces profits in the case of the FOREX and the commodity markets, but not in the case of the US stock market.
- Sprache
-
Englisch
- Erschienen in
-
Series: CESifo Working Paper ; No. 5066
- Klassifikation
-
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Financial Forecasting and Simulation
Computational Techniques; Simulation Modeling
- Thema
-
efficient market hypothesis
anomaly
overreaction hypothesis
abnormal returns
contrarian strategy
trading strategy
trading robot
t-test
- Ereignis
-
Geistige Schöpfung
- (wer)
-
Caporale, Guglielmo Maria
Gil-Alana, Luis A.
Plastun, Alex
- Ereignis
-
Veröffentlichung
- (wer)
-
Center for Economic Studies and ifo Institute (CESifo)
- (wo)
-
Munich
- (wann)
-
2014
- Handle
- Letzte Aktualisierung
-
10.03.2025, 11:43 MEZ
Datenpartner
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Objekttyp
- Arbeitspapier
Beteiligte
- Caporale, Guglielmo Maria
- Gil-Alana, Luis A.
- Plastun, Alex
- Center for Economic Studies and ifo Institute (CESifo)
Entstanden
- 2014
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