The Time-Varying Nature of the Overreaction Effect: Evidence from the UK

Authors

  • Panagiotis Andrikopoulos De Montfort University, United Kingdom
  • Arief Daynes University of Portsmouth, United Kingdom
  • Paraskevas Pagas University of Portsmouth, United Kingdom

DOI:

https://doi.org/10.32890/ijbf2011.8.3.1

Keywords:

Overreaction, Stock market efficiency, Small-size effect, Time-variation, Behavioral finance

Abstract

Previous studies on the overreaction effect in the UK show that prior losers consistently outperform prior winners in the period 1975 to 1990. This paper extends current knowledge by assessing the above phenomenon in the UK market for the period 1987 to 2007. In contrast to earlier research, we produce evidence of a weak presence of the overreaction effect for the latest test period. Further, we show that, after adjusting for size, the overreaction effect almost disappears and any additional excess post-formation return to prior-losers is attributable to market cycles. This study implies that the presence of the overreaction effect in the UK stock market is time-varying and difficult to exploit in practice.

 

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Published

05-09-2011

Issue

Vol. 8 No. 3 (2011): International Journal of Banking and Finance (IJBF) Vol. 8, No.3, 2011

Section

Articles

How to Cite

Andrikopoulos, P., Daynes, A., & Pagas, P. (2011). The Time-Varying Nature of the Overreaction Effect: Evidence from the UK. International Journal of Banking and Finance, 8(3), 1-36. https://doi.org/10.32890/ijbf2011.8.3.1

Research impact

Harvested 2026-09-07
2 citations, from OpenAlex — the highest of the sources checked

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Identifiers DOI 10.32890/ijbf2011.8.3.1 OpenAlex W3121949401