An event study of price movements following realized jumps

Research output: Contribution to journalArticle

Abstract

Abstract in Undetermined
Price jumps are mostly related to investor reactions to unexpected extreme news. We perform an event study of price movements after jumps to analyse if investors' reactions are affected by psychological biases. We employ recent non-parametric methods based on intraday returns to separate large price movements that are related to unexpected news from those merely caused by periods of high volatility. In general, we find evidence for irrational pricing, which can be associated with investors' optimistic behavior in a bull market and the pessimism prevailing in a bear market. Furthermore, our analysis confirms the conjecture that small firms are more subject to speculative trading than large firms.

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Research areas and keywords

Subject classification (UKÄ) – MANDATORY

  • Economics

Keywords

  • Behavioral finance, Empirical asset pricing, Volatility modelling, Financial econometrics, Anomalies in prices, Quantitative finance
Original languageEnglish
Pages (from-to)933-946
JournalQuantitative Finance
Volume11
Issue number6
Publication statusPublished - 2011
Publication categoryResearch
Peer-reviewedYes