Price Reversals, Bid-Ask Spreads, and Market Efficiency

Allen B Atkins, Edward A. Dyl

Research output: Contribution to journalArticle

131 Citations (Scopus)

Abstract

We examine the behavior of common stock prices after a large change in price occurs during a single trading day and find evidence that the stock market appears to have overreacted, especially in the case of price declines; however, the magnitude of the overreaction is small compared to the bid-ask spreads observed for the individual stocks in the sample. We interpret this finding as being consistent with a market that is efficient after transactions costs are considered.

Original languageEnglish (US)
Pages (from-to)535-547
Number of pages13
JournalJournal of Financial and Quantitative Analysis
Volume25
Issue number4
DOIs
StatePublished - 1990
Externally publishedYes

Fingerprint

Market efficiency
Bid/ask spread
Price reversal
Overreaction
Transaction costs
Stock prices
Stock market

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Price Reversals, Bid-Ask Spreads, and Market Efficiency. / Atkins, Allen B; Dyl, Edward A.

In: Journal of Financial and Quantitative Analysis, Vol. 25, No. 4, 1990, p. 535-547.

Research output: Contribution to journalArticle

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