Do the prices of stock index futures in Asia overreact to U.S. market returns?

Alexander Kwok Wah Fung*, Kin Lam, Ka Ming Lam

*Corresponding author for this work

    Research output: Contribution to journalJournal articlepeer-review

    24 Citations (Scopus)
    6 Downloads (Pure)


    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.

    Original languageEnglish
    Pages (from-to)428-440
    Number of pages13
    JournalJournal of Empirical Finance
    Issue number3
    Publication statusPublished - Jun 2010

    Scopus Subject Areas

    • Finance
    • Economics and Econometrics

    User-Defined Keywords

    • Asian futures markets
    • Behavioral finance
    • G14
    • G15
    • International finance
    • Investors' sentiment
    • Overreaction


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