A review of the international literature on the short term predictability of stock prices conditional on large prior price changes: Microstructure, behavioral and risk related explanations.

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  2. Dr Bartosz Gebka
  3. Professor Robert Hudson
Author(s)Amini S, Gebka B, Hudson R, Keasey K
Publication type Article
JournalInternational Review of Financial Analysis
Year2012
Volume26
Issue
Pages1-17
ISSN (print)1057-5219
ISSN (electronic)1873-8079
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In this paper we review the literature on the short term predictability of stock prices conditional on large prior price changes. This research area is characterised by a large number of studies reflecting different markets, time periods, methodologies and model parameters. Whilst most of the papers do find elements of predictability in markets subsequent to large price changes the wide diversity in research approaches makes it very difficult to draw general conclusions from past studies. In addition there is little consensus within the literature regarding the causes of predictability with papers variously favouring explanations based around market microstructure, behavioural anomalies and the response of market participants to changing risk. We identify the key empirical findings from the literature, evaluate the explanations for the cause of the effects, discuss the links of the research programme to other areas of finance and finally review possible topics for future research in the area.
PublisherElsevier BV
URLhttp://dx.doi.org/10.1016/j.irfa.2012.04.002
DOI10.1016/j.irfa.2012.04.002
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