An Empirical Study on the Overreaction of Shanghai Stock Market

Abstract

in stock market in Shanghai, and tests whether there has been overreaction in the stock market. The empirical result shows more abnormal return of loser portfolio than that of winner portfolio, which indicates over-reaction of the stock market. Moreover, the term is longer and the reversion degree of return is weaker. The result means that the risk difference between winner and loser portfolios does not adequately explain the over-reaction. The main reason for the overreaction we think is the institutional background and other constraining conditions of the stock market in the Chinese mainland.