Stock Returns Following Large Price Changes and News Releases – Evidence from Germany

Abstract

Abstract/Zusammenfassung We revisit the overreaction hypothesis in the light of information effects. Using a sample period from 2005–2012 covering 2,542 large price changes in the German stock market, our results indicate that information effects can explain both overreaction and underreaction patterns. Specifically, we find that large positive price changes without public information signals are followed by short-term price reversals. In contrast, negative price shocks concurrent with a public announcement are associated by price continuations. The results are robust to size effects and sub-periods. Furthermore, we design a trading strategy to show that the observed return predictability could have been exploited for large negative price changes. Kursreaktionen auf grose Aktienkursanderungen – Eine empirische Untersuchung fur den deutschen Markt unter Berucksichtigung der Informationswirkung von Pressemeldungen In diesem Beitrag wird die Uberreaktionshypothese fur den deutschen Aktienmarkt vor dem Hinter...