Market overreaction, firm-specific information and macroeconomic variables in US and Chinese markets during COVID-19

PurposeThis study examines the impact of firm-specific information and macroeconomic variables on market overreaction of US and Chinese winner and loser portfolio before and during COVID-19.Design/methodology/approachThe firm-specific information includes firm size, volume, volatility, return of asset (ROA), return of equity (ROE), earning per share (EPS) and quick ratio while the macroeconomic variables are export rate, import rate, real GDP, nominal GDP, FDI, IPI and unemployment rate. Besides, one-third of the top performance stocks are categorized as winner portfolio while one-third of lowest performance stocks are categorized as loser portfolio. This study uses AECR to indicate stock return and measure market overreaction. GAECR is used to determine contrarian profit. The data range of pre-COVID-19 is from 1-Jan-2015 to 31-Dec-2019 while the period of COVID-19 is from 1-Jan-2020 to 31-Dec-2020.FindingsIn pre-COVID-19, firm-specific information (volatility, ROA, ROE and EPS) and macroeconomic variables are found to be correlated to stock return in US and Chinese portfolios except Chinese winner portfolio. Nonetheless, the impact of firm-specific information has vanished and macroeconomic variables are significant to stock return in COVID-19. It shows that investors rely on the economic indicators to trade in turbulent period due to emergence of COVID-19 as a disruption in market. Furthermore, US and Chinese portfolios are overreacted during COVID-19. Chinese loser portfolio has higher tendency of overreaction than US loser portfolio while US winner portfolio has higher tendency of overreaction than Chinese winner portfolio.Originality/valueThe results of this study assists academician, practitioners and investors on understanding and create awareness to the existence of market overreaction and the determinants that can cause the phenomenon.

Investor Attention, Market Dynamics, and Momentum in the Korean Stock Market

This study examines the effects of investor attention on momentum in the Korean stock market. The results reveal significant negative momentum profits in stock groups with high investor attention (high turnover stocks), but insignificant results in those with low investor attention (low turnover stocks). Within high turnover stock groups, the winner portfolio has a declining price trend and insignificant performance, while the loser portfolio realizes significant positive performance through a substantial price increase in the future period. The momentum effect is highly dependent on the reversed performance of the loser portfolio. Second, the performance of the large overreaction stock group shows a more significant negative momentum effect compared to the low overreaction stock group, that is, the degree of overreaction significantly affects the momentum effect. Third, negative momentum profits are consistently observed regardless of the market dynamics. Specifically, more substantial and significant negative performance occurs in the transition market, where the market situation reverses between the past and future periods. Fourth, negative momentum profits are consistently identified even after controlling for the impact of common factors and volatility and liquidity into turnover. Our findings are qualitatively different from the characteristics of the traditional momentum effects generally reported in Western countries.

Pembuktian Return Momentum dan Kontarian pada Saham Syariah

The purpose of this paper are to examine and analyse returns of momentum and contarian portofolio on Islamic stocks listed on the Jakarta Islamic Index 30 (JII 30) for the period 2010-2018. The method used in this study is Jagedeesh and Titmant (1993). Winner portfolio is formed by buying stocks with the best return performance in the past and selling stocks with bad returns in the past. Whereas a loser portfolio is formed by buying shares of poor return performance in the past and selling stocks with good returns in the past. Formations and observations used 1,3,6 and 12 months. With portfolio weighting based on equal-weighted and value-weighted. Return of momentum portofolio when winner minus loser positive. Return of contarian portofolio when loser minus winner positive. Significant contours are determined by a one-sample t-test using SPSS 25. The study did not find any return on the Islamic stocks listed on JII 30 for the period 2010-2018. But investors can still use this strategy to increase investment returns on Islamic stocks. Because this strategy still provides positive returns.

KINERJA PORTOFOLIO SAHAM BERDASARKAN STRATEGI INVESTASI MOMENTUM PADA INDEKS KOMPAS100

The purpose of this study was to determine the performance of the stock portfolio using the momentum investment strategy on the Kompas100 index. The scope of this research area are companies incorporated in the Kompas100 Index listed in the Indonesia Stock Exchange for the period 2012-2017. The number of samples used was 53 samples. The method of data collection is done through non-participant observation and using two different test analysis techniques on average. Based on the results of data analysis it was found that the results of the two different test averages of Sharpe Index on the winner's portfolio get insignificant results and the loser portfolio gets significant results. This made no momentum but a contrarian strategy, where the loser portfolio measured by the Sharpe Index significantly decreased during the ownership period of 3, 6, 12 months and made the loser portfolio suffer prolonged losses. The results of this study reflect that contrarian strategy is a strategy used by investors to expect a reversal of stock returns at a certain time period, namely the rate of return that is initially positive or negative is expected to experience a reversal in a certain period of time. Keywords: stock portfolio performance, momentum investment strategy, Kompas100 index.

Testing the overreaction hypothesis in the mexican stock market

<p>The objective of this work is to test the overreaction hypothesis in the Mexican Stock Market for the period of 2002-2015, using monthly data and applying the Cumulative Average Residuals (CAR) methodology via the CAPM model and the three-factor model proposed by Fama and French. The CAR model is applied to test how winner and loser portfolios perform during the period under analysis. Overall, the evidence shows that average CAR for the loser portfolio is 0.706%, whereas CAR for the winner portfolio is 0.364%, and that are statistically different; nevertheless, both portfolios are co-integrated. This research contributes to the financial literature identifying overreaction in the Mexican Stock Market during the period examined.</p>

OVERREACTION ANOMALY DI PASAR MODAL INDONESIA (STUDI PADA SAHAM-SAHAM LQ-45 TAHUN 2014-2018)

This study aims to analyze whether market overreaction symptoms occur in Indonesia Stock Exchange, specifically on the LQ-45 Index from 2014 to 2018. This research was separated over 6 and 12 months. The sample was consistent stocks of LQ-45 index companies period 2014 to 2018, it is determined by purposive sampling method. Stocks were classified into two portfolios based on the value of Cumulative Abnormal Return (CAR). Winner portfolio was 3 stocks with the highest value of CAR, and loser portfolio was 3 stocks with the lowest value of CAR. Market overreaction is measured by Average Cumulative Abnormal Return (ACAR) loser portfolio outperformed of winner portfolio ACAR. As a result, the research found that overreaction indications were evidence, but no significance statistically. The result absence of market overreaction symptoms on the Indonesia Stock Exchange showed that the contrarian investment strategy was inappropriate to use, especially on LQ-45 index stocks. Keywords: Overreaction, winner-loser anomaly, LQ-45 Index.

The Timing Of Equity Mean Reversion In Relation To The Global Economic Cycle

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; mso-pagination: none; mso-layout-grid-align: none;" class="MsoNormal"><span style="color: black; font-size: 10pt; mso-themecolor: text1; mso-fareast-language: ZH-HK;"><span style="font-family: Times New Roman;">Investor overreaction results in the systematic overshooting of stock prices and their subsequent mean reversion. International studies on the overreaction hypothesis generally find that the mean reversion of stock returns take place after a consistent winning or losing trek for over 36 months. We construct monthly-rebalanced prior 36-month winner and loser portfolios from global equities and examine their characteristics over the period from 1999 to 2009. Using the residual returns from the capital asset pricing model (CAPM) and the 3-factor model of Fama and French (1993) as proxies for monthly abnormal returns, it is found that the loser portfolio accumulates abnormal returns mainly during turbulent times while the winner portfolio accumulates abnormal returns mainly during the upswing of the economic cycle. The resilient nature of the loser portfolio in the downswing of the economic cycle suggests that investments in past long-term losers could be regarded as a safe haven during financial market turmoil. In line with the prior study results conducted on South African stocks, the abnormal returns between the winner and loser portfolios are negatively correlated and the winner-loser spreads are found to be cyclical in relation to the economic cycle for global equities as investor sentiments and future prospects change.</span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>

PENGARUH OVERREACTION TERHADAP HARGA SAHAM

This research aims to test the impact of market over reaction toward share prices on winner portfolio and loser portfolio. This is done using market adjusted model. The result indicates that there is an impact on over reaction toward share prices for loser portfolio and winner portfolio shares. This indicates that capital market efficiency in Indonesia is not yet strong.Overreaction happening on winner portfolio differs from loser portfolio.Keywords: overreaction, winner portfolio, loser portfolio, market adjusted model