An event study of price movements following realized jumps
Author
Summary, in English
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.
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.
Department/s
Publishing year
2011
Language
English
Pages
933-946
Publication/Series
Quantitative Finance
Volume
11
Issue
6
Document type
Journal article
Publisher
Taylor & Francis
Topic
- Economics
Keywords
- Behavioral finance
- Empirical asset pricing
- Volatility modelling
- Financial econometrics
- Anomalies in prices
- Quantitative finance
Status
Published
ISBN/ISSN/Other
- ISSN: 1469-7696