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Short-term share price overreaction : evidence from the Johannesburg Stock Exchange
The Overreaction Hypothesis and share price overreaction has been a widely researched phenomenon since the 1980s, although most work has focused on longer-term share return reversals. As an emerging market and part of the BRICS collective, South Africa provides an interesting investment environment...
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| Format: | Thesis |
| Language: | English |
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Department of Finance and Tax
2016
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| _version_ | 1867613311167627264 |
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| access_status_str | Open Access |
| author | Alur, Rushikesh |
| author2 | Toerien, Francois |
| author_browse | Alur, Rushikesh Toerien, Francois |
| author_facet | Toerien, Francois Alur, Rushikesh |
| author_sort | Alur, Rushikesh |
| collection | Thesis |
| description | The Overreaction Hypothesis and share price overreaction has been a widely researched phenomenon since the 1980s, although most work has focused on longer-term share return reversals. As an emerging market and part of the BRICS collective, South Africa provides an interesting investment environment within which to investigate this phenomenon. Limited research has been done in South Africa on share price overreaction, again nearly all focusing on the longer term. This dissertation examined short term overreaction (over 1 and 5-day periods) on the Johannesburg Stock Exchange (JSE) over the period July 2000 to June 2015. Furthermore, periods of financial crisis were isolated from the full sample period and tested separately, in order to assess whether periods of financial instability affect the magnitude of share price overreaction on the JSE. Whereas the common approach in this field is to investigate overreaction on a relative basis (for example by ranking share returns over a prior period and focusing on extreme relative performances), this thesis follows other literature that examines share return reversals following extreme one-day share price changes beyond absolute cut-off values (in this case ±5% and ±10%). The methodology considered an abnormal returns measure based on total return index values, and used a multivariate regression to test for one day and five day share return reversals. The effect of average prior returns, market volatility, company size, value, price-to-earnings and book-to-market ratios on abnormal returns were also considered. Lastly, a portfolio strategy based on one day and five day return reversals following large positive or negative one-day returns was investigated to test for usability as a possible trading strategy. |
| format | Thesis |
| id | oai:open.uct.ac.za:11427/21748 |
| institution | University of Cape Town (South Africa) |
| language | eng |
| last_indexed | 2026-06-10T12:34:06.076Z |
| license_str | Not specified — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from UCTD — University of Cape Town Open Access Repository |
| publishDate | 2016 |
| publishDateRange | 2016 |
| publishDateSort | 2016 |
| publisher | Department of Finance and Tax |
| publisherStr | Department of Finance and Tax |
| record_format | dspace |
| source_str | UCTD — University of Cape Town Open Access Repository |
| spelling | oai:open.uct.ac.za:11427/21748 Short-term share price overreaction : evidence from the Johannesburg Stock Exchange Alur, Rushikesh Toerien, Francois Financial Management The Overreaction Hypothesis and share price overreaction has been a widely researched phenomenon since the 1980s, although most work has focused on longer-term share return reversals. As an emerging market and part of the BRICS collective, South Africa provides an interesting investment environment within which to investigate this phenomenon. Limited research has been done in South Africa on share price overreaction, again nearly all focusing on the longer term. This dissertation examined short term overreaction (over 1 and 5-day periods) on the Johannesburg Stock Exchange (JSE) over the period July 2000 to June 2015. Furthermore, periods of financial crisis were isolated from the full sample period and tested separately, in order to assess whether periods of financial instability affect the magnitude of share price overreaction on the JSE. Whereas the common approach in this field is to investigate overreaction on a relative basis (for example by ranking share returns over a prior period and focusing on extreme relative performances), this thesis follows other literature that examines share return reversals following extreme one-day share price changes beyond absolute cut-off values (in this case ±5% and ±10%). The methodology considered an abnormal returns measure based on total return index values, and used a multivariate regression to test for one day and five day share return reversals. The effect of average prior returns, market volatility, company size, value, price-to-earnings and book-to-market ratios on abnormal returns were also considered. Lastly, a portfolio strategy based on one day and five day return reversals following large positive or negative one-day returns was investigated to test for usability as a possible trading strategy. 2016-09-14T12:50:42Z 2016-09-14T12:50:42Z 2016 Master Thesis Masters MCom http://hdl.handle.net/11427/21748 eng application/pdf Department of Finance and Tax Faculty of Commerce University of Cape Town |
| spellingShingle | Financial Management Alur, Rushikesh Short-term share price overreaction : evidence from the Johannesburg Stock Exchange |
| thesis_degree_str | Master's |
| title | Short-term share price overreaction : evidence from the Johannesburg Stock Exchange |
| title_full | Short-term share price overreaction : evidence from the Johannesburg Stock Exchange |
| title_fullStr | Short-term share price overreaction : evidence from the Johannesburg Stock Exchange |
| title_full_unstemmed | Short-term share price overreaction : evidence from the Johannesburg Stock Exchange |
| title_short | Short-term share price overreaction : evidence from the Johannesburg Stock Exchange |
| title_sort | short term share price overreaction evidence from the johannesburg stock exchange |
| topic | Financial Management |
| url | http://hdl.handle.net/11427/21748 |
| work_keys_str_mv | AT alurrushikesh shorttermsharepriceoverreactionevidencefromthejohannesburgstockexchange |