How do stocks react to extreme market events? Evidence from Brazil |
| |
| Institution: | 1. Administration Program, Pontifical Catholic University of Parana, 1155, Imaculada Conceição St., Curitiba, PR, 80215-901, Brazil;2. Desautels Faculty of Management, McGill University, 1001 Sherbrooke St. W, Montreal, QC, H3A 1G5, Canada;1. School of Mathematical Sciences, Faculty of Science and Technology, Universiti Kebangsaan Malaysia, 43600 Bangi, Selangor, Malaysia;2. Graduate School of Business and Law (GSBL), RMIT University, 379-405 Russell St, Melbourne, VIC 3000, Australia;1. Complex Systems Community, University of Siena, Italy;2. Department of Information Engineering and Mathematics, University of Siena, via Roma 56, 53100 Siena, Italy;3. Department of Management and Quantitative Sciences, University of Naples “Parthenope”, via A. Ferdinando Acton 38, 80133 Naples, Italy;1. IPAG LAB, IPAG Business School, 184, boulevard Saint-Germain, 75006 Paris, France;2. Departement of Business Administration, IQRA University, Karachi, 75300, Pakistan;1. Department of Financial Studies, University of Delhi, Delhi, India;2. Groupe ESC Pau – France, Rue Saint-John Perse, BP 7512–64075, France |
| |
| Abstract: | This paper studies the short-term (21 trading days) behavior of Brazilian stocks in the event of extreme movements in the Brazilian market index. Using cumulative abnormal returns, we find that stocks tend to overreact after both positive and negative events, as well as global and domestic shocks. Interestingly, this behavior is particularly intense when the events are not clustered. This counterintuitive finding can be explained by the Contrast Hypothesis, since shocks during calm circumstances can be viewed by investors as more surprising. In fact, when we split events according to market volatility, we document a stronger overreaction when volatility is low. |
| |
| Keywords: | Overreaction Extreme events Contrast hypothesis Brazilian market |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
