Price reversals: Bid-ask errors or market overreaction?☆
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2021, Journal of Banking and FinanceCitation Excerpt :Since there are no stocks in our sample (and only commodities), this explanation also does not seem to hold. Conrad and Kaul (1993) and Kaul and Nimalendran (1990) attempt to demonstrate that the long-run reversal profits may stem from errors in prices from non-synchronous trading and bid-ask spreads. Since our data does not come from actively traded markets, microstructure issues do not play an important role; therefore, our study also hardly supports this view.
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We appreciate the comments and suggestions made by Clifford Ball, Victor Bernard, K.C. Chan, Jennifer Conrad, Tom George, Charles Jones, Andrew Karolyi, participants in finance seminars at Ohio State University and the University of Michigan, and especially Jerold Warner (the editor) and Eugene Fama (the referee). We also thank Amy McDonald for preparing the manuscript. Partial funding for this project was provided by the School of Business Administration, University of Michigan.