Journal of Financial and Quantitative Analysis Vol. 25 No. 4 1990
Price Reversals, Bid-Ask Spreads, and Market Efficiency
Abstract
We examine the behavior of common stock prices after a large change in price occurs during a single trading day and find evidence that the stock market appears to have overreacted, especially in the case of price declines; however, the magnitude of the overreaction is small compared to the bid-ask spreads observed for the individual stocks in the sample. We interpret this finding as being consistent with a market that is efficient after transactions costs are considered.
- DOI
- 10.2307/2331015
- Volume
- 25
- Issue
- 4
- Pages
- 535
- Sources
- openalex crossref