Department of Finance and Decision Sciences
Do the prices of stock index futures in Asia overreact to U.S. market returns?
We extend the overreaction study to interaction of international markets and find that intraday price reversals exist in Asian index futures markets following extreme movement in U.S. market. Profitable opportunities exist after considering transaction cost. We show that the reversal cannot be explained by rational arguments such as risk, liquidity and bid-ask spread. We further observe that a magnitude effect exists. Overreaction is more prominent in the latter period than in the initial period. After calm-down periods, overreaction is greatly reduced. These observations support the explanation that the source of price reversals lies in behavioral biases. © 2009 Elsevier B.V.
Asian futures markets, Behavioral finance, G14, G15, International finance, Investors' sentiment, Overreaction
Source Publication Title
Journal of Empirical Finance
Link to Publisher's Edition
Fung, A., Lam, K., & Lam, K. (2010). Do the prices of stock index futures in Asia overreact to U.S. market returns?. Journal of Empirical Finance, 17 (3), 428-440. https://doi.org/10.1016/j.jempfin.2009.12.006