Price Reversals, Bid-Ask Spreads, and Market Efficiency

Allen B Atkins, Edward A. Dyl

Research output: Contribution to journalArticle

138 Scopus citations

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

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Price Reversals, Bid-Ask Spreads, and Market Efficiency'. Together they form a unique fingerprint.

  • Cite this