Skip to content
Journal article

On the computation of returns in tests of the stock market overreaction hypothesis

Dissanaike G...(+1 more)

Journal of Banking and Finance, vol. 18, issue 6 (1994) pp. 1083-1094

  • 7


    Mendeley users who have this article in their library.
  • 27


    Citations of this article.
  • 721


    ScienceDirect users who have downloaded this article.
Sign in to save reference


A number of recent studies have attempted to find out whether investors overreact. We argue that, in many of these studies, the method used to compute cumulative returns-the arithmetic method-is flawed, and we show that estimates of portfolio performance can be affected. Our findings are relevant not only to tests of the overreaction hypothesis but to other areas in finance, where the arithmetic method and event-study approach are used. © 1994.

Author-supplied keywords

  • Anomalies
  • CAR
  • Contrarian strategies
  • Efficient markets
  • Event studies
  • Overreaction
  • Predictability

Find this document

Get full text

Cite this document

Choose a citation style from the tabs below