Overreaction Effects Independent of Risk and Characteristics : Evidence from the Japanese Stock Market
This paper shows that the firm size (SZ) and the book-to-market ratio (BM) cannot fully explain stock returns on prior-return-based portfolios in Japan. The overreaction effect after controlling for SZ and BM effects is significant and plays an important role in explaining the zero-investment returns on the loser-to-winner strategy. Motivated by this observation, we construct a portfolio whose return serves as a new factor that mimics overreaction. This new factor improves the performances of the three-factor model [Fama and French (1993)] in several prior-return-based and characteristics-based portfolios
Year of publication: |
[2004]
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Authors: | Chiao, Chaoshin |
Other Persons: | Hueng, C. James (contributor) |
Publisher: |
[2004]: [S.l.] : SSRN |
Saved in:
freely available