Market Overreaction

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Market Overreaction
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  MARKET OVERREACTION EXAMINING OVERREACTION EFFECT IN NEW YORK STOCK EXCHANGE  B.A. (Hons.) Business Economics   By   AANCHAL AGGRAWAL   (Roll Number – 2002)   K.MANISHA   (Roll Number – 2072)   ANKIT SETHI   (Roll Number – 2069)   RASHMI PANTH   (Roll Number – 2025)   Supervisor:   Mr. ABHISHEK KUMAR    Assistant Professor   (University of Delhi)    OBJECTIVE •   To test overreaction hypothesis. •   Time taken by NYSE to correct itself.  LITERATURE !   Earlier efficiency of stock markets was once taken for granted, it is now being seriously questioned, primarily due to the cumulating evidence on the reversal behaviour of stock prices, i.e. the prior period’s worst stock performers (losers) outperform the prior period’s best stock performers (winners) in the subsequent period, suggesting that the stock returns are predictable.  !   Stock market are subject to the waves of optimism and pessimism. !   Shoot up over good news while shoot down at bad news !   Initial price reaction is followed by a correction and stock prices gradually revert back to their fundamental values suggesting that the market has overreacted in initial period, subsequently corrects itself !   if hypothesis true, contrarian stock selection strategy would yield significant positive returns over a given test period.
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