Richard Thaler: Does the Stock Market Overreact? [STUDY]VW Staff
Does the Stock Market Overreact? Research in experimental psychology suggest that, in violation of Bayes’ rule, most people tend to “overreact” to unexpected and dramatic news events. This study of market efficiency investigates whether such behavior affects stock prices. The empirical evidence based on CRSP monthly return data, is consistent with the overreaction hypothesis.