A review of the international literature on the short term predictability of stock prices conditional on large prior price changes: Microstructure, behavioral and risk related explanations

Amini, Shima; Gębka, Bartosz; Hudson, Robert; Keasey, Kevin

doi:10.1016/j.irfa.2012.04.002

Cited by 56 publications

(31 citation statements)

References 77 publications

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“…Although the bulk of the above herding research has been conducted on the basis of data with a frequency ranging from daily to annual, recent studies have expanded the scope of herding research to the intraday level. This development is in line with the notion that herding often manifests itself as a short term phenomenon (Froot et al, 1992) and is part of a wider attempt to capture intraday trading dynamics (see the excellent review by Amini et al, 2013) in view of financial technology advances that have allowed for increased trading in terms of size (markets are able to absorb larger trading volumes) and frequency (latency has decreased immensely 13 ). In this context, Gleason et al (2004) found no evidence of significant intraday 7 Small capitalization stocks entail higher information risk, since their limited analyst coverage leads to less information being available about them.…”

Section: Introductionsupporting

confidence: 71%

Intraday herding on a cross-border exchange

Andrikopoulos

Kallinterakis

Ferreira

et al. 2017

International Review of Financial Analysis

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This study investigates intraday herding on the Euronext, the world's first cross-border consolidated exchange. Intraday herding is significant in the Euronext as a group and presents us with size, industry and country effects. Importantly, the trading dynamics of the group's member markets significantly affect each other and can, in the case of the Netherlands, promote herding formation. Intraday herding is found to be significant before, during and after the 2007-09 financial crisis period, with its presence appearing the least strong during the crisis. Overall, we demonstrate for the first time in the literature that cross-border exchanges harbour versatile herding dynamics at intraday level, a finding which reflects recent advances in financial technology and the ongoing financial integration in Europe. JEL classification: G02; G15

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Section: Introductionsupporting

confidence: 71%

Intraday herding on a cross-border exchange

Andrikopoulos

Kallinterakis

Ferreira

et al. 2017

International Review of Financial Analysis

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“…Our work is motivated by the literature on stock price predictability after large price changes (e.g. (Amini et al 2013) and the vast literature on calendar effects (e.g. (Urquhart and McGroarty 2014) as well as the literature on overreaction.…”

Section: Introductionmentioning

confidence: 99%

A calendar effect: Weekend overreaction (and subsequent reversal) in spot FX rates

Dao

McGroarty

Urquhart

2016

Journal of Multinational Financial Management

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This paper investigates a calendar effect, namely the weekend overreaction, in spot foreign exchange markets of 8 major and 9 emerging currencies. We find that after a large price difference between Friday close and subsequent Monday open, most markets are likely to reverse in multiple horizons during the following week, which is consistent with the overreaction hypothesis. We develop a reversal trading strategy to exploit this effect which we show are robust to transaction costs and interest rates. In the out-of-sample test, the strategy is able to generate abnormal risk-adjusted returns, which suggests that these currency markets might be weak-form inefficient.

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“…These findings provide new insights that the stock with the lowest price is influenced by intraday trading mechanism variables with excellent price formation efficiency. Overall, these findings show an interesting pattern where the higher the stock price, the smaller the influence of the intraday variable (Amini, Gebka, Hudson, & Keasey, 2013). Furhermore, Dyl et al (2019) explain how to price reversal and continuation correlate with previous stock returns, excess trading volume, stock liquidity, and company-specific information.…”

Section: Discussionmentioning

confidence: 95%

Determinants of price reversal in high-frequency trading: empirical evidence from Indonesia

Santosa

2020

Investment Management and Financial Innovations

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This article analyzes whether the factors of the mechanism of high-frequency trading (HFT) or intraday trading affect the process of price reversal and continuation. The price reversal phenomenon is gaining importance rapidly due to the increasingly intensive use of IT/Fintech-based trading automation facilities on the Indonesia Stock Exchange. However, one knows little about how their trading affects volatility and liquidity pressures that cause price reversals. A new research approach uses the factors of market microstructure mechanism based on high-frequency data (HFD-intraday). The research method uses purposive random sampling, which classified price fractions into three groups, specifically low price, medium price, and high price, which are analyzed by logistic panel regression. The research variables used include price reversal (dependent), stock return, trading volume, transaction frequency, volume/frequency (V/F) proxy, volatility, and liquidity. According to low price model research findings, all variables show a significant effect on price reversal; for medium price model, all variables except liquidity show a significant effect on price reversal; and for high price model, all variables have a significant effect on price reversal, except trading volume and volatility. In conclusion, low price shares tend to have higher price reversal probability compared to continuity because they tend to be liquid, low institutional ownership, and minimal reporting/analysis and are controlled by HFTs (uninformed traders). Some variables are not significant because of the bounce effect around the bid-ask spread. AcknowledgmentMany thanks to Armida S. Alisjahbana, Roy H. Sembel, Budiono, Rahardi S. Rahmanto, and the anonymous referee/reviewer for valuable inputs and feedback.

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A review of the international literature on the short term predictability of stock prices conditional on large prior price changes: Microstructure, behavioral and risk related explanations

Cited by 56 publications

References 77 publications

Intraday herding on a cross-border exchange

Intraday herding on a cross-border exchange

A calendar effect: Weekend overreaction (and subsequent reversal) in spot FX rates

Determinants of price reversal in high-frequency trading: empirical evidence from Indonesia

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