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Overreaction, Underreaction, and the Low-P/E Effect
10 references·16 citing·45 second hop
Overreaction, Underreaction, and the Low-P/E Effect (1995)Overreaction, Underreaction, and the Low-…Choices, Values, and Frames (2013)Choices, Values, and FramesTimid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking (2000)Timid Choices and Bold Foreca…Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior (1992)Tests of Analysts' Overreacti…Measuring abnormal performance (1992)Measuring abnormal performanceEvidence on the Possible Underweighting of Earnings-Related Information (1991)Evidence on the Possible Unde…Evidence that stock prices do not fully reflect the implications of current earnings for future earnings (1990)Evidence that stock prices do…Market overreaction (1988)Market overreactionDoes the Stock Market Overreact? (1985)Does the Stock Market Overrea…Misspecification of capital asset pricing (1981)Misspecification of capital a…Security Analysis: Principles and Technique. (1963)Security Analysis: Principles…Market Rationality: Efficient Market Hypothesis versus Market Anomalies (2016)Market Rationality: Efficient…Factors Influencing Indian Individual Investor Behaviour: Survey Evidence (2012)Factors Influencing Indian In…Identifying and Overcoming Behavioural Impediments to Long Term Responsible Investment: A Focus on UK Institutional Investors (2011)Identifying and Overcoming Be…Changes in Unrecognised Deferred Tax Accruals from Carry‐Forward Losses: Earnings Management or Signalling? (2010)Changes in Unrecognised Defer…Earnings management practices among growth and value firms (2009)Earnings management practices…Behavioral Finance: Theories and Evidence (2008)Behavioral Finance: Theories …Market Timing Strategies That Worked (2003)Market Timing Strategies That…Extreme Return Reversal in the Stock Market (2003)Extreme Return Reversal in th…Resistance is futile: the assimilation of behavioral finance (2002)Resistance is futile: the ass…Last Chance Earnings Management: Using the Tax Expense to Achieve Earnings Targets (2002)Last Chance Earnings Manageme…Contrarian Strategies and Investor Expectations: The U.K. Evidence (2001)Contrarian Strategies and Inv…Noise Trader Risk in Financial Markets (2000)Noise Trader Risk in Financia…Investor Overreaction: Evidence That Its Basis Is Psychological (2000)Investor Overreaction: Eviden…Cash Flow Is King? Cognitive Errors by Investors (2000)Cash Flow Is King? Cognitive …A Model of Investor Sentiment (2000)A Model of Investor SentimentInvestor Overreaction in International Stock Markets (1999)Investor Overreaction in Inte…CAPITAL ASSET PRICES: A THEORY OF MARKET EQUILIBRIUM UNDER CONDITIONS OF RISK* (1964)The Valuation of Risk Assets and the Selection of Risky Investments in Stock Portfolios and Capital Budgets (1965)THE VALUATION OF RISK ASSETS AND THE SELECTION OF RISKY INVESTMENTS IN STOCK PORTFOLIOS AND CAPITAL BUDGETS**This paper is another in a series of interrelated theoretical and statistical studies of corporate financial and investment policies being made under grants from the Rockefeller Foundation, and more recently the Ford Foundation, to the Harvard Business School. The generous support for this work is most gratefully acknowledged. The author is also much indebted to his colleagues Professors Bishop, Christenson, Kahr, Raiffa, and (especially) Schlaifer, for extensive discussion and commentary on an earlier draft of this paper; but responsibility for any errors or imperfections remains strictly his own.[Professor Sharpe's paper, “Capital Asset Prices: A Theory of Market Equilibrium Under Conditions of Risk” (Journal of Finance, September 1964) appeared after this paper was in final form and on its way to the printers. My first section, which parallels the first half of his paper (with corresponding conclusions), sets the algebraic framework for sections II, III and VI, (which have no counterpart in his paper) and for section IV on the equilibrium prices of risk assets, concerning which our results differ significantly for reasons which will be explored elsewhere. Sharpe does not take up the capital budgeting problem developed in section V below.] (1975)Insiders' profits, costs of trading, and market efficiency (1986)Debt/Equity Ratio and Expected Common Stock Returns: Empirical Evidence (1988)Fundamentals and Stock Returns in Japan (1991)Risk, Return, and Equilibrium: Empirical Tests (1973)The Cross-Section of Expected Stock Returns (1992)Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency (1993)Good News for Value Stocks: Further Evidence on Market Efficiency (1997)An Anatomy of Trading Strategies (1998)Econometrics of Event Studies**We thank Espen Eckbo, Jon Lewellen, Adam Kolasinski, and Jay Ritter for insightful comments, and Irfan Safdar and Alan Wancier for research assistance. (2007)Editor's Choice Digesting Anomalies: An Investment ApproachMean reversion in stock prices (1988)Post-Earnings-Announcement Drift: Delayed Price Response or Risk Premium? (1989)Market efficiency, long-term returns, and behavioral finance1The comments of Brad Barber, David Hirshleifer, S.P. Kothari, Owen Lamont, Mark Mitchell, Hersh Shefrin, Robert Shiller, Rex Sinquefield, Richard Thaler, Theo Vermaelen, Robert Vishny, Ivo Welch, and a referee have been helpful. Kenneth French and Jay Ritter get special thanks.1 (1998)Investor Psychology and Asset Pricing (2001)The Framing of Decisions and the Psychology of Choice (1981)Prospect theory: An analysis of decision under risk (1988)Advances in prospect theory: Cumulative representation of uncertainty (1992)Framing: Toward Clarification of a Fractured Paradigm (1993)Subjective well-being: Three decades of progress. (1999)Theory of games and economic behavior (2019)Filter Rules and Stock-Market Trading (1966)Diversification and Firm Performance: Exploring the Moderating Effects of Information Technology Spending (2009)Financial analysts' evaluation of enhanced disclosure of non-financial performance indicators (2011)The impact of the Arab Spring and the Ebola outbreak on African equity mutual fund investor decisions (2017)Further Evidence On Investor Overreaction and Stock Market Seasonality (1987)Evidence of Predictable Behavior of Security Returns (1990)The Geography of Equity Analysis (2005)Profitability, investment and average returns (2006)The Disposition Effect and Underreaction to News (2006)The General Theory of Employment, Interest and Money, by John Maynard Keynes (1936)The General Theory of Employment, Interest and Money. (1936)Judgment Under Uncertainty: Heuristics and Biases. (1984)Multifactor Explanations of Asset Pricing Anomalies (1996)Cross-sectional variation in the stock market response to accounting earnings announcements (1989)An informational efficiency perspective on the post-earnings announcement drift (1994)How naive is the stock market's use of earnings information? (1996)Information Uncertainty and Analyst Forecast Behavior* (2006)The Articulation of Price-Earnings Ratios and Market-to-Book Ratios and the Evaluation of Growth (1996)Tools of the trade: the socio-technology of arbitrage in a Wall Street trading room (2004)ESG Integration and the Investment Management Process: Fundamental Investing Reinvented (2015)Overconfidence and Excess Entry: An Experimental Approach (1999)Flawed Self-Assessment (2004)
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References

  • 1985Does the Stock Market Overreact?7,569 cited
  • 2013Choices, Values, and Frames5,320 cited
  • 1990Evidence that stock prices do not fully reflect the implications of current earnings for future earnings2,010 cited
  • 1981Misspecification of capital asset pricing1,286 cited
  • 2000Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking1,277 cited
  • 1992Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Price Behavior1,003 cited
  • 1992Measuring abnormal performance840 cited
  • 1963Security Analysis: Principles and Technique.354 cited
  • 1991Evidence on the Possible Underweighting of Earnings-Related Information342 cited
  • 1988Market overreaction134 cited

Cited by

  • 2000Cash Flow Is King? Cognitive Errors by Investors80 cited
  • 2000Investor Overreaction: Evidence That Its Basis Is Psychological69 cited
  • 2008Behavioral Finance: Theories and Evidence68 cited
  • 2000Noise Trader Risk in Financial Markets67 cited
  • 2003Market Timing Strategies That Worked64 cited
  • 2012

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Factors Influencing Indian Individual Investor Behaviour: Survey Evidence
61 cited
  • 2002Resistance is futile: the assimilation of behavioral finance60 cited
  • 2010Changes in Unrecognised Deferred Tax Accruals from Carry‐Forward Losses: Earnings Management or Signalling?47 cited
  • 2000A Model of Investor Sentiment46 cited
  • 2001Contrarian Strategies and Investor Expectations: The U.K. Evidence45 cited
  • 2009Earnings management practices among growth and value firms43 cited
  • 2002Last Chance Earnings Management: Using the Tax Expense to Achieve Earnings Targets43 cited
  • 2016Market Rationality: Efficient Market Hypothesis versus Market Anomalies40 cited
  • 2011Identifying and Overcoming Behavioural Impediments to Long Term Responsible Investment: A Focus on UK Institutional Investors36 cited
  • 1999Investor Overreaction in International Stock Markets31 cited
  • 2003Extreme Return Reversal in the Stock Market29 cited