1. Continuing Overreaction and Stock Return Predictability
- Author
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Sang Hyun Yun, Sonya S. Lim, and Suk Joon Byun
- Subjects
040101 forestry ,Economics and Econometrics ,050208 finance ,05 social sciences ,04 agricultural and veterinary sciences ,Stock return ,Accounting ,0502 economics and business ,Econometrics ,Economics ,0401 agriculture, forestry, and fisheries ,Predictability ,Weighted arithmetic mean ,Finance ,Overconfidence effect - Abstract
We study the return predictability of a measure of continuing overreaction based on the weighted average of signed volumes. We find that the strategies of buying stocks with upward continuing overreaction and selling stocks with downward continuing overreaction generate significant positive returns and that our measure of continuing overreaction is a better predictor of future returns than past returns. The results are stronger among stocks primarily held by investors more prone to biased self-attribution. Our results provide direct support for the model of return predictability based on overconfidence and biased self-attribution.
- Published
- 2016
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