Investor overreaction and unobservable portfolios: evidence from an emerging market

摘要

We use the system GMM to explore both cross sectional variations and time-series effects within the post-event period for losers and winners portfolios. Some of these effects are not observable, but ignoring them lays the estimation open to bias from concealed heterogeneity amongst companies and periods. Using daily data on a sample of companies which experienced dramatic 1-day price changes, we find strong evidence of price reversal. We also find that unobservable portfolios outperform traditional size portfolios.