Short-Term Overreaction to Specific Events: Evidence from an Emerging Market

Sabri Boubaker 1, 2 Hisham Farag Duc Khuong Nguyen 3
1 GROUPE ESC TROYES - Champagne School of Management
2 IRG - Institut de Recherche en Gestion
3 IPAG Business School
Abstract : This paper investigates the short-term overreaction to specific events and whether stock prices are predictable in the Egyptian stock exchange (EGX). We find evidence of the short-term overreaction in the EGX. Losers (“bad news” portfolios) significantly outperform winners (“good news” portfolios) and investors can earn abnormal return by selling the winners and buying losers. Terrorist attacks have negative and significant abnormal returns for three days post event followed by price reversals on day four post event. Whereas, the tensions in the Middle East region have a negative and significant abnormal returns on event day followed by price reversals on day one post event. Moreover, the formation of a new government has no effect on the average abnormal returns post event in the EGX. The results also show that small firms tend to have greater price reversals compared to large firms. Overall, our results provide evidence of the leakage of information in the EGX.
Keywords : Overreaction hypothesis Price reversal Emerging markets
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Journal articles
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https://hal-upec-upem.archives-ouvertes.fr/hal-01158095
Contributor : Sabri Boubaker <>
Submitted on : Friday, May 29, 2015 - 3:08:27 PM
Last modification on : Friday, October 4, 2019 - 1:36:35 AM

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Sabri Boubaker, Hisham Farag, Duc Khuong Nguyen. Short-Term Overreaction to Specific Events: Evidence from an Emerging Market. Research in International Business and Finance, Elsevier, 2015, 35, pp.153-165. ⟨10.1016/j.ribaf.2014.10.002⟩. ⟨hal-01158095⟩

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