Examining Overreaction in Indian Stock Market for Quarterly News

Authors

  • Sitangshu Khatua Heritage Business School, Kolkata, India
  • Hemant Kumar Pradhan XLRI, Jamshedpur, India

DOI:

https://doi.org/10.5195/emaj.2014.57

Keywords:

Overreaction, Event Study, Abnormal Return, Cumulative Abnormal Return, Market Model, Quarterly Announcements.

Abstract

Market Overreaction is a very familiar and age-old craze amongst traders. Pigou (1929) defined it as a ‘conducting rod along which an error of optimism or pessimism, once generated, propagates itself about the business world.’ The question of whether or not Indian stock prices market is overreacted during any stock-specific news is best answered by a comprehensive and concurrent analysis of the various tests and data available while using the event study.

This study wants to address the impact of size, volatility and asymmetry in the terms of investors’ overreaction to the firm-specific news not only individually but also jointly. The outcome of this study helps to solve the problem concerning the extent to which quarterly announcements have informational content, and whether the investors are affected by the signals. The present study substantiates the policy recommendation for the market players as well as for the analysts in estimating earning announcement events under different market condition and different market capitalization value of the firm.

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Published

2014-08-06

Issue

Vol. 4 No. 1 (2014)

Section

Articles

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