Lookup NU author(s): Dr Bartosz Gebka,
Professor Robert Hudson
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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.
Author(s): Amini S, Gebka B, Hudson R, Keasey K
Publication type: Article
Journal: International Review of Financial Analysis
Print publication date: 01/01/2013
ISSN (print): 1057-5219
ISSN (electronic): 1873-8079
Publisher: Elsevier BV
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