Return predictability following different drivers of large price changes

Publisher:
Elsevier
Publication Type:
Journal Article
Citation:
International Review of Financial Analysis, 2016, 45 pp. 202 - 214
Issue Date:
2016-12-25
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This study uniquely examines return predictability following different drivers of large price changes. We use several novel features of the Australian information generation environment to overcome identification issues of large price changes inherent in earlier studies. In contrast to prior results, we find that large price changes are permanent when they are driven by public information consistent with the semi-strong efficient markets hypothesis and also when driven by private information. For large price changes which do not correspond with information, we show that investors could profit from the subsequent over-reaction in returns.
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