Assessing the Time-Varying Nature of the Over-Reaction Effect in UK

Can retail investors exploit stock market anomalies?

“…The majority of UK literature in this field is however using the data after 1975. In unreported results, in line with Andrikopoulos et al (2009), this study finds that the reversal returns found by UK studies are driven by pre-1990 data and reversal profitability has disappeared using post-1990 data. As a robustness test, the sample period is divided into two equal sub-periods with a subsequent reestimate of the strategies' profitability.…”

“…For example, Dimson and Marsh (1999) use UK data from 1989 to 1997 and report that the size effect has reversed, with large capitalization companies outperforming small capitalization firms. Andrikopoulos et al (2009Andrikopoulos et al ( ), using post-1990 UK data, report that long-term reversal returns are weak. With the publication of a strategy, a number of investors attempt to exploit the anomaly and thus, share prices adjust accordingly to the information.…”