Market overreaction and investment strategies

Han, C.; Hwang, S.; Ryu, D.

doi:10.1080/00036846.2015.1058913

Market overreaction and investment strategies

Han, C.; Hwang, S.; Ryu, D.

Authors

C. Han

S. Hwang

D. Ryu

Abstract

We investigated the overreaction of the Korean market in response to shocks in the US stock market, and analysed the dynamic relationship between these two markets since 1996. We found that the KOSPI 200 index futures overreacted to the S&P 500 index returns during the period from 2000 to 2009 when the Korean market was in its growth stage. As the Korean market matured and the KOSPI 200 overnight futures were introduced in 2009, the overreaction disappeared. When investors employed the Kelly model or Value-at-Risk to exploit the overreaction, their trading strategies produced significant profits during the growth stage even after considering transaction costs and risk, but the profits attenuated once the overnight futures market was launched in 2009.

Citation

Han, C., Hwang, S., & Ryu, D. (2016). Market overreaction and investment strategies. Applied Economics, 47(54), 5868-5885. https://doi.org/10.1080/00036846.2015.1058913

Journal Article Type	Article
Acceptance Date	Jun 25, 2015
Online Publication Date	Jun 25, 2015
Publication Date	Nov 20, 2016
Deposit Date	Jul 6, 2015
Publicly Available Date	Dec 25, 2016
Journal	Applied Economics
Print ISSN	0003-6846
Electronic ISSN	1466-4283
Publisher	Taylor and Francis Group
Peer Reviewed	Peer Reviewed
Volume	47
Issue	54
Pages	5868-5885
DOI	https://doi.org/10.1080/00036846.2015.1058913
Keywords	Market overreaction, Behavioural biases, KOSPI 200 futures, S&P 500 index, Overnight futures market, G11, G14, G19.
Public URL	https://durham-repository.worktribe.com/output/1402792

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Copyright Statement
This is an Accepted Manuscript of an article published by Taylor & Francis Group in Applied Economics on 25/06/2015, available online at: http://www.tandfonline.com/10.1080/00036846.2015.1058913.