Long-Term Market Overreaction or Biases in Computed Returns?
Journal of Finance (1993)
- ISSN: 00221082
- DOI: 10.2307/2328881
Available from www.jstor.org
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Abstract
We show that the returns to the typical long-term contrarian strategy implemented in previous studies are upwardly biased because they are calculated by cumulating single-period (monthly) returns over long intervals. The cumulation process not only cumulates "true" returns but also the upward bias in single-period returns induced by measurement errors. We also show that the remaining "true" returns to loser or winner firms have no relation to overreaction. This study has important implications for event studies that use cumulative returns to assess the impact of information events.
Available from www.jstor.org
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Long-Term Market Overreaction or ...
Long-Term Market Overreaction or Biases in Computed Returns? Jennifer Conrad Gautam Kaul The Journal of Finance, Vol. 48, No. 1. (Mar., 1993), pp. 39-63. Stable URL: http://links.jstor.org/sici?sici=0022-1082%28199303%2948%3A1%3C39%3ALMOOBI%3E2.0.CO%3B2-W The Journal of Finance is currently published by American Finance Association. Your use of the JSTOR archive indicates your acceptance of JSTOR's Terms and Conditions of Use, available at http://www.jstor.org/about/terms.html. JSTOR's Terms and Conditions of Use provides, in part, that unless you have obtained prior permission, you may not download an entire issue of a journal or multiple copies of articles, and you may use content in the JSTOR archive only for your personal, non-commercial use. Please contact the publisher regarding any further use of this work. Publisher contact information may be obtained at http://www.jstor.org/journals/afina.html. Each copy of any part of a JSTOR transmission must contain the same copyright notice that appears on the screen or printed page of such transmission. JSTOR is an independent not-for-profit organization dedicated to and preserving a digital archive of scholarly journals. For more information regarding JSTOR, please contact support@jstor.org. http://www.jstor.org Thu Feb 1 16:00:08 2007
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