Journal of Business and Economic Statistics
Опубликовано на портале: 01-11-2007Jennifer Conrad, Mustafa N. Gultekin, Gautam Kaul Journal of Business and Economic Statistics. 1997. Vol. 15. No. 3. P. 379-386.
In recent years, several researchers have argued that the stock market consistently overreacts to new information, which, in turn, results in price reversals. Lehmann and others showed that a contrarian can make substantial profits in the short run by simply buying losers and selling winners. We, however, demonstrate that these profits are largely generated by the bid-ask bounce in transaction prices; accounting for this "bounce" by using bid prices eliminates all profits from price reversals for NASDAQ-NMS stocks and most of the profits for NYSE/AMEX stocks. Moreover, any remaining profits (regardless of their source) disappear at trivial levels of transactions costs.