Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/106473
Authors: 
Caporale, Guglielmo Maria
Gil-Alana, Luis
Plastun, Alex
Year of Publication: 
2015
Series/Report no.: 
DIW Discussion Papers 1444
Abstract: 
This paper examines long-term price overreactions in various financial markets (commodities, US stock market and FOREX). First, t-tests are carried out for overreactions as a statistical phenomenon. Second, a trading robot approach is applied to test the profitability of two alternative strategies, one based on the classical overreaction anomaly, the other on a so-called 'inertia anomaly'. Both weekly and monthly data are used. Evidence of anomalies is found predominantly in the case of weekly data. In the majority of cases strategies based on overreaction anomalies are not profitable, and therefore the latter cannot be seen as inconsistent with the EMH.
Subjects: 
efficient Market Hypothesis
anomaly
overreaction hypothesis
abnormal returns
contrarian strategy
trading strategy
trading robot
t-test
JEL: 
G12
G17
C63
Document Type: 
Working Paper

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