| Abstract: | In this article we investigate stock price behavior before and after surprise events. We form four base portfolios and sixteen control portfolios, taking into consideration the event direction, the magnitude of event-day surprises, the potentially confounding effects due to calendar regularities in stock returns, and the ex-post outlier month of October 1987. Using capital market data from 1964 to 1989, we find a pre-event stock price behavior pattern that we call the reverse anticipation puzzle. We also confirm the existence of the overreaction pattern. The pre- and post-event stock price behavior patterns are found to be similar. |
