Short-term Overreaction in American Depository Receipts

• Type: Article in International Scientific Journal
• Date: 2020

Authors

Júlio Lobão (Author) FEP; Maria Eva Jerke (Author) FEP

Journal

Title: Scientific Annals of Economics and Business

Vol. 67 No. 4

Pages: 423-435

ISSN: 2501-1960

Publisher: Alexandru Ioan Cuza University of Iasi

Indexing

ISI Web of Knowledge - 0 Citations

Scopus - 0 Citations

DOAJ

Econlit

EBSCO

Scientific classification

CORDIS: Social sciences > Economics > Financial science

FOS: Social sciences > Economics and Business

Other information

Authenticus ID: P-00T-BGS

DOI: 10.47743/saeb-2020-0023

Abstract (EN): In this paper we examine for the first time the short-term predictability of American Depository Receipts (ADRs) in reaction to extreme price movements. Based on an analysis of 2,911 extreme price movements that took place within either normal trading hours or after-hours in the period 2001-2019, we conclude that those extreme returns were on average followed by significant reversals. This response represents an overreaction in prices, which challenges the weak version of the efficient market hypothesis. Price reversals are especially pronounced following extreme returns observed during after-hours, which lends support to the assertion that ADR markets are particularly inefficient during this trading period. These findings carry important implications for both market practitioners and regulators.

Language: English

Type (Professor's evaluation): Scientific