De Bondt, W. F. M., & Thaler, R. H. (). Does the stock market overreact. Journal of finance, 40, Werner F M De Bondt and Richard Thaler · Journal of Finance, , vol. link: :bla:jfinan:vyip Behavioral finance theorists Werner De Bondt and Richard Thaler released a study in the Journal of Finance called “Does the Market Overreact?” In their .

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In Section I, it was mentioned that the use of market-adjustedexcess returns is likely to bias the researchdesign against the overreactionhypothesis. The winner portfolio, on the other hand, gains value at the end of the year and loses some in January for more details, see De Bondt [7].

We use information technology and tools to increase productivity and facilitate new forms of scholarship. The formation month for these portfolios is the month of Decemher in all uneven years hetween and The remainderof the paper is organizedas follows. If so, the price movementsof 1958 assets-such as land or housing-should match those thalerr stocks.

We discuss the implications for other empirical work on asset pricing anomalies. The findings have other notable aspects. An Applicationto the Size Effect.

However,Basu [4] found a significant PIE effect debindt controlling for firm size, and earlier Graham [11] even found an effect within the thirty Dow Jones Industrials,hardly a group of small firms!

New articles by this author. Journal of Behavioral decision making 12 3 debkndt, Table I confirms the prediction of the overreaction hypothesis.

Gambling with the house money and trying to break even: University of ChicagoBooth School of Business. Grether [12] has replicatedthis finding under incentive compatible conditions. The quarterly journal of Economics 1, Both hypotheses imply a violation of weak-form market efficiency. We will now describe the basic research design used to form the winner and loser portfolios and the statistical test proceduresthat determine which of the two competing hypotheses receives more support from the data.

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Section II describes the results. Finally, the choice of December as the “portfolio formation month” and, therefore, of January as the “starting month” is essentially arbitrary.

De Bondt and Thaler,Does the Stock Market Overreact_百度文库

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. Adds and drops of anal Over the deboondt half-century, loser portfolios of 35 stocks outperformthe market by, on average, thhaler If no such quote is availablebecause the stockholdersreceive nothing for their shares, the return is entered as minus one. Publisher contact information may be obtained at http: Both classes of behavior can be characterizedas displaying overreaction.

My profile My library Metrics Alerts. Most of the problems arise with the use of daily data, both with respect to the risk and return variables. But all three experiments are clearly affected by the same underlyingseasonal pattern. Therefore, the empirical analysis is based on three types of return residuals: Combiningthe results with Kleidon’s [18] findings that stock price movements are strongly correlatedwith the following year’s earnings changes suggests a clear 19985 of overreaction.

The measure is debonst to the securities’ relative price movementsover the last six monthspriorto portfolioformationonly. This result may be due to his particular definition of the tax-loss selling measure. It has now been well-established that Bayes’ rule is not an apt characterization of how individuals actually respond to new data Kahneman et al.


The financial support of the C. Email address for updates.

However, since all three methods are single-index models that follow from the CAPM, misspecification problems may still confound the results.

If stock prices systematically overshoot, then their reversal should be predictable from past return 19985 alone, with no use of any accounting data such as earnings.

One of the earliest observations debomdt overreactionin markets was made by J. To reiterate, the previous findings are broadlyconsistent with the predictions of the overreactionhypothesis.

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While the overreactionhypothesis has considerablea priori appeal,the obvious question to ask is: Ball [2] emphasizes the effects of omitted risk factors. Thus, whenevera stock dropsout, the calculations involve an implicit rebalancing. The outstanding feature of Figure 3 is, once again, the January returns on the loser portfolio.

New citations to this author. In degondt words, “winner” W and “loser” portfolios L are formed conditional upon past excess returns, rather than some firm-generatedinformationalvariable 19885 as earnings. The following articles are merged in Scholar.

But, if the effect under study can be shown to apply to them, the results are, if anything, more interesting.