Growing Science » Management Science Letters » Overreaction and representativeness heuristic in initial public offering: Evidence from Tehran Stock Exchange

Journals


MSL Volumes


Management Science Letters

ISSN 1923-9343 (Online) - ISSN 1923-9335 (Print)
Quarterly Publication
Volume 4 Issue 2 pp. 287-294 , 2014

Overreaction and representativeness heuristic in initial public offering: Evidence from Tehran Stock Exchange Pages 287-294 Right click to download the paper Download PDF

Authors: Maryam Khalili Araghi, Bahman Esmaeili

Keywords: Market Value, Overreaction, Prior return, Representative Heuristic, Trading Volume, Winner and loser portfolio

Abstract: The subject of initial public offering (IPO) and the unusual short-time return of compared with another stocks, allocated many studies and researches in world level and in stock market to itself. The studied researches pointed to the short-time return of IPOs, which are higher than market and its long term return in return. One of the main hypothesis of behavioral finance is overreaction that is the main factor of overreaction in investor behavior is representativeness heuristic. This paper investigates overreaction behavior on shares of IPOs in Tehran stock exchange by considering 2 strategies of buy and hold and cumulative average return. The study investigates the effects of different factors such as price, market value, prior return and trading volume on overreaction. The results show negative effects of price and transaction volume on overreaction. In another words, price and volume of transactions are lower (higher) and higher return (lower) and therefore increased overreaction.

How to cite this paper
Araghi, M & Esmaeili, B. (2014). Overreaction and representativeness heuristic in initial public offering: Evidence from Tehran Stock Exchange.Management Science Letters , 4(2), 287-294.

Refrences
Ahmad, Z., & Hussain, S. (2001). KLSE Long Run Overreaction and the Chinese New?Year Effect. Journal of business finance & accounting, 28(1?2), 63-105.

Bondt, W. F., & Thaler, R. (1985). Does the stock market overreact?. The Journal of finance, 40(3), 793-805.

Bondt, W. F., & Thaler, R. H. (1987). Further evidence on investor overreaction and stock market seasonality. The Journal of Finance, 42(3), 557-581.

Chan, W. S. (2003). Stock price reaction to news and no-news: Drift and reversal after headlines. Journal of Financial Economics, 70(2), 223-260.

Chopra, N., Lakonishok, J., & Ritter, J. R. (1992). Measuring abnormal performance: do stocks overreact?. Journal of Financial Economics, 31(2), 235-268.

Choi, D., & Hui, S. K. (2012). The Role of Surprise: Understanding Overreaction and Underreaction to Unanticipated Events using In-Play Soccer Betting Market.

Conrad, J., & Kaul, G. (1993). Long?Term Market Overreaction or Biases in Computed Returns?. The Journal of Finance, 48(1), 39-63.

Daniel, K. D., Hirshleifer, D., & Subrahmanyam, A. (2004). A Theory of Overconfidence, Self-Attribution, and Security Market Under-and Over-reactions(No. 0412006). EconWPA.

Demury, D., Syda, S., Fallahzadeh Abarquei, A. (2008). Overreaction of investors to past performance patterns listed companies in Tehran Stock Exchange. Study Accounting and Auditing, 15(54), 62-47.

DeBondt, W. F., & Thaler, R. (1985). Does the Stock Market Overreact?. The Journal of Finance, 22(3), 793-805.

Dreman, D. N., & Berry, M. A. (1995). Overreaction, underreaction, and the low-P/E effect. Financial Analysts Journal, 21-30.

Espahbodi, R., Dugar, A., & Tehranian, H. (2001). Further evidence on optimism and underreaction in analysts & apos; forecasts. Review of Financial Economics, 10(1), 1-21.

Fama, E. F. (1998). Market efficiency, long-term returns, and behavioral finance.Journal of financial economics, 49(3), 283-306.

Han, D. (2013). Evaluating the profitability of contrarian vs. momentum strategies in China & apos; s stock market.

Jekaterina, K. (2013). Factors forming irrational lithuanian individual investors’ behavior. Business System and Economics, 3(1), 69-78.

Lakonishok, J., Shleifer, A., & Vishny, R. W. (1994). Contrarian investment, extrapolation, and risk. The journal of finance, 49(5), 1541-1578.

Maheshwari, S. (2013). “What Goes Up, Comes Down”: Critique of Overreaction Effect over the last 3 Decades. In International Conference on Technology and Business Management March (Vol. 18, p. 20).

Prast, H. M. (2004). Investor psychology: A behavioural explanation of six finance puzzles. De Nederlandsche Bank.

Rahnamayerodpooshti, F., Hajiha. Z.¸ Zarei Sudan, A. (2008). The function of behavioral finance to explain the scientific base for stock analysis. Journal of Science, Islamic Azad University Research Council, 3(7).

Skinner, D. J. (1994). Why firms voluntarily disclose bad news. Journal of Accounting Research, 32(1), 38-60.

Soffer, L. C., Thiagarajan, S. R., & Walther, B. R. (2000). Earnings preannouncement strategies. Review of Accounting Studies, 5(1), 5-26.

Zarowin, P. (1989). Short-run market overreaction: size and seasonality effects.The Journal of Portfolio Management, 15(3), 26-29.

Journal: Management Science Letters | Year: 2014 | Volume: 4 | Issue: 2 | Views: 2802 | Reviews: 0

Related Articles:

Add Reviews

Name:*
E-Mail:
Review:
Bold Italic Underline Strike | Align left Center Align right | Insert smilies Insert link URLInsert protected URL Select color | Add Hidden Text Insert Quote Convert selected text from selection to Cyrillic (Russian) alphabet Insert spoiler
Security Code: *

® 2010-2024 GrowingScience.Com