Stock Price Reversals and Overreaction to News Events: A Survey of Theory and Evidence

@inproceedings{Bondt1989StockPR,
  title={Stock Price Reversals and Overreaction to News Events: A Survey of Theory and Evidence},
  author={Werner De Bondt},
  year={1989}
}
Stock price reversals may be due to short-term overreactions to news, waves of unjustified optimism or pessimism about future earnings, fear and normatively “excessive” risk premia, or other causes. This paper reviews [1] the psychological literature on Bayesian decision-making and intuitive prediction; [2] the arguments that overreaction by individuals is likely to matter at the market level; [3] the evidence on short-term and long-term price reversals. The research findings are compared with… 
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