Original article Microeconomics

ON STOCK RETURN PATTERNS FOLLOWING LARGE MONTHLY PRICE MOVEMENTS: EMPIRICAL EVIDENCE FROM INDIA

Srikanth Parthasarathy - Rajalakshmi School of Business, Chennai, India
Kannadas Sendilvelu - SDM Institute for Management Development, Mysore
Received: 02 Aug 2022
Revised:
Published:
Downloads: 0
Citations: 0
Issue 3/2022
JEL E44 G12 G14 D53
DOI https://doi.org/10.56497/etj2267301

Abstract

The purpose of this study is to examine the short-horizon stock behaviour following large monthly price changes of the large, liquid stocks in the Indian stock market. The event study methodology is used with two different methodologies and three abnormal return computational methods to improve the robustness and reliability of the results. This study evidences significant reversals following both large price declines and increases up to six months. Further, stronger initial shocks were followed by stronger reversals. The results are consistent with the ‘overreaction hypothesis’ in the Indian stock market. The results are robust to microstructure effects, extreme events, industry, period, methodology and market effects. The abnormal returns following large price declines might be economically significant with potential economic profits for traders.

How to cite this article

Parthasarathy, S. and Sendilvelu, K. (2022). On Stock Return Patterns Following Large Monthly Price Movements: Empirical Evidence from India. Economic Thought Journal, 67(3), 249-268. https://doi.org/10.56497/etj2267301 

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