Who overreacts to overnight news?

Empirical evidence from the Korean stock market

Enjung Kwon, Young Ho Eom, Woon Wook Jang, Jaehoon Hahn

Research output: Contribution to journalArticle

Abstract

We investigate whether the pattern of intraday return reversal in Korea, recently found to be significant only when the previous day’s United States stock market movements are relatively large, is due to overreaction of investors. We estimate a partial adjustment model modified to distinguish price reaction at the open and at the close, and the results indicate that the Korean stock market tends to overreact at the open and underreact at the close. Furthermore, our evidence suggests that foreign investors’ trading behavior contributes to overreaction at the open, while individual investors’ trading behavior contributes to return reversal during the trading day.

Original languageEnglish
Pages (from-to)298-321
Number of pages24
JournalAsia-Pacific Journal of Financial Studies
Volume44
Issue number2 Special Issue
DOIs
Publication statusPublished - 2015 Apr 1

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Overreaction
Return reversal
Korean stock market
Empirical evidence
Trading behavior
News
Korea
Partial adjustment model
Individual investors
Foreign investors
Price reaction
Stock market
Investors

All Science Journal Classification (ASJC) codes

  • Finance

Cite this

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Who overreacts to overnight news? Empirical evidence from the Korean stock market. / Kwon, Enjung; Eom, Young Ho; Jang, Woon Wook; Hahn, Jaehoon.

In: Asia-Pacific Journal of Financial Studies, Vol. 44, No. 2 Special Issue, 01.04.2015, p. 298-321.

Research output: Contribution to journalArticle

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