Stock Market Over-reaction: The South African Evidence

Abstract

It has been suggested that stock markets over-react and that investors pay too much attention to recent “dramatic” news. If over-reaction does occur and prices overshoot then there should be a subsequent revision in the opposite direction. This paper outlines empirical research into the over-reaction hypothesis on the Johannesburg Stock Exchange using data over the period July 1974 to June 1989 for two hundred and four relatively well traded securities.