Intraday price reversals for index futures in the US and Hong Kong

We observe intraday price reversals following large price changes at the opening of the S&P 500 Futures market and the HSI Futures market. We note that the magnitude of subsequent price reversals is positively related to the initial price changes, and that the price reversals are not caused by a...

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Bibliographic Details
Published in:Journal of banking & finance 2000-07, Vol.24 (7), p.1179-1201
Main Authors: Fung, Alexander Kwok-Wah, Mok, Debby M.Y., Lam, Kin
Format: Article
Language:English
Subjects:
Banking
Capital market
Efficient markets
Finance
Futures
Futures market
Hong Kong
Index futures
Investment policy
Market efficiency
Overreaction
Prices
Spread
Stock index futures
Stock prices
Studies
U.S.A
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Summary:We observe intraday price reversals following large price changes at the opening of the S&P 500 Futures market and the HSI Futures market. We note that the magnitude of subsequent price reversals is positively related to the initial price changes, and that the price reversals are not caused by a bid–ask spread, or by panic among investors. We also note that such price reversals can be exploited to give rise to profitable opportunities after transaction costs, even though these may not be very significant. This study shows that investor overreaction may be a universal phenomenon and irrational investor behavior like overreaction may also exist among groups of sophisticated investors.
ISSN:0378-4266
1872-6372
DOI:10.1016/S0378-4266(99)00072-2