The Reversal of Large Stock‐Price Decreases
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- Author(s): MARC BREMER, RICHARD J. SWEENEY
- Published: Apr 30, 2012
- Pages: 747-754
- DOI: 10.1111/j.1540-6261.1991.tb02684.x
Extremely large negative 10‐day rates of return are followed on average by larger‐than‐expected positive rates of return over following days. This price adjustment lasts approximately 2 days and is observed in a sample of firms that is largely devoid of methodological problems that might explain the reversal phenomenon. While perhaps not representing abnormal profit opportunities, these reversals present a puzzle as to the length of the price adjustment period. Such a slow recovery is inconsistent with the notion that market prices quickly reflect relevant information.