Momentum and Overreaction Effect a Study of Indian Stock Market
Author: Maheshwari Supriya
Publisher: Independent Author
Published: 2022-12-03
Total Pages: 0
ISBN-13: 9781805451044
DOWNLOAD EBOOKThe search and investigation of stock market anomalies have always been a popular area of research among the academicians. The Efficient Market Hypothesis (EMH) that was once very well accepted and adored the most dominant place in the traditional finance theories, somehow, in recent times, the validity of the same has been questioned. The evidence of various stock market anomalies that document excess profit making opportunities resulted in critical re-examination of EMH. Probably the two most famous anomalies that have attracted the interest of both academicians and practitioners are the ones that are based on stocks return continuation (known as momentum effect) and long-term stock returns reversal (known as overreaction effect). Ever since DeBondt and Thaler (1985) and Jegadeesh and Titman (1993) drew attention towards the overreaction and momentum effect, these have remained as some of the most hotly debated anomalies in the academic literature. The investment strategies based on such continuation and long-term return reversal effects are commonly known as momentum and contrarian strategies, respectively. Both momentum and long-term reversal effect were found to persist in a majority of the out-of-sample tests using data from the U.S. as well as other developed stock markets across different time periods. Initially, most of the early investigations were based on the U.S. stock market, but gradually the investigation for the same spread out internationally to other developed stock markets. As a result, there exists a vast majority of literature supporting momentum and contrarian profitability in majority of the developed markets.