This paper estimates a partial adjustment model with noise (Amihud and Mendelson (1987)) extended to distinguish price reaction at the open and at the close in order to better understand the pattern of intraday return reversal in the Korean stock market. The results of the model estimation suggest that the Korean stock market tends to overreact at the open, and underreact at the close. We also find that overreaction of the opening prices is partly due to information-related pricing errors, while underreaction of the closing prices is unlikely due to information-related pricing errors. Furthermore, our empirical results suggest that foreign investors contribute to overreaction at the open in the Korean stock market, and individual investors trading behavior contributes to price reversal during the trading day.
Keywords intraday price movement, partial adjustment model, information shock, investors behavior, liquidity
학회 소식
공지사항
[2014년 제 1차] Who overreacts to overnight news?: Empirical Eviden
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2014-02-24
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