Efficient markets: evidence of overreaction and underreaction in the Nasdaq Equity Markets

Abstract

Ο σκοπος αυτής της εργασίας είναι να ερευνήσει την βραχυχρόνια αντίδραση των επενδυτών σε σοκ τιμών στο χρηματιστήριο Nasdaq. Κεντρική της ιδέα αποτελεί η υπόθεση της αποτελεσματικής αγοράς. Εξετάζονται 4 δείκτες μετόχων επιλεγμένοι ως προς την κεφαλαιοποίηση τους προκειμένου να εξακριβωθεί αν υφίσταται η υπόθεση της αποτελεσματικότητας της αγοράς και αν παρουσιάζονται ημερολογιακές ανωμαλίες

The scope of this thesis is to investigate investor short-term reaction to price shocks in the US Nasdaq equity market. At its core lays the concept of the Efficient Market Hypothesis. It is examined whether four indices in Nasdaq equity market provide indications for efficient short-term reaction. Four indices* are selected with respect to their capitalization and they are the Nasdaq Composite, the Nasdaq Global Select Market, the Nasdaq Global Market and the Nasdaq Capital Market. The analysis is designed to extract results covering the period from December 2007 to January 2019. On a first step, a study at a theoretical framework is conducted describing the Efficient Market Hypothesis theory. A process necessary to elaborate better its main ideas and to set some foundation on the academic literature later presented. On a second step, an empirical analysis is conducted, where the four selected indices are analyzed using the methodology of Abnormal Returns (ARs) and Average Cumulative Abnormal Returns (ACARs). This methodology aimed to investigate short term reaction after price shocks and examine market efficiency under different scenarios.