Abstract
Employing jumps in stock return as a proxy for information shocks, we empirically discover the short-term overaction in the Chinese stock market. Trading strategies short (long) stocks with the largest (smallest) lagged cumulative jump returns earn sizable positive returns. Besides, the information shocks exhibit significant predictive ability for future returns. The market overreaction is robust to firm characteristics, subperiod analysis, and intraday analysis. Investor attention facilitates this short-term market overreaction.
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