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Underreaction

"In predicting the future, people tend to get anchored by salient past events. Consequently, they underreact."
Shefrin [book]

"The underreaction evidence shows that security prices underreact to news such as earnings announcements. If the news is good, prices keep trending up after the initial positive reaction; if the news is bad, prices keep trending down after the initial negative reaction."
"The momentum evidence briefly described in Chapter 1 is closely related to underreaction, since the positive autocorrelations of returns over relatively short horizons may reflect slow incorporation of news into stock prices."
Shleifer [book] p112

Top 15 Underreaction Papers

1. HONG, H. and J.C. STEIN, 1999. A unified theory of underreaction, momentum trading and overreaction in asset markets. The Journal of Finance. [Cited by 363]
2. IKENBERRY, D.L., J. LAKONISHOK and T. VERMAELEN, 1994. Market underreaction to open market share repurchases. [Cited by 254]
3. JEGADEESH, N. and S. TITMAN, 1995. Overreaction, delayed reaction, and contrarian profits. Review of Financial Studies. [Cited by 56]
4. KANG, J.K., et al., 1999. The underreaction hypothesis and the new issue puzzle: evidence from Japan. Review of Financial Studies. [Cited by 38]
5. ABARBANELL, J. and R. LEHAVY, 2003. … Role of Reported Earnings in Explaining Apparent Bias and Over/Underreaction in Analysts' Earnings …. Journal of Accounting and Economics. [Cited by 34]
6. POTESHMAN, A.M., 2001. Underreaction, Overreaction, and Increasing Misreaction to Information in the Options Market. The Journal of Finance. [Cited by 25]
7. BOEHME, R.D. and S.M. SORESCU, 2002. The Long-run Performance Following Dividend Initiations and Resumptions: Underreaction or Product of …. The Journal of Finance. [Cited by 24]
8. IKENBERRY, D.L. and S. RAMNATH, 2002. Underreaction to Self-Selected News Events: The Case of Stock Splits. Review of Financial Studies. [Cited by 19]
9. DREMAN, D. and M. BERRY, 1995. Overreaction, underreaction, and the low-P/E effect. Financial Analysts Journal. [Cited by 16]
10. AMIR, E. and Y. GANZACH, 1998. Overreaction and underreaction in analysts' forecasts. Journal of Economic Behavior and Organization. [Cited by 14]
11. SHANE, P. and P. BROUS, 2001. Investor and(Value Line) Analyst Underreaction to Information about Future Earnings: The Corrective …. Journal of Accounting Research. [Cited by 14]
12. MIKHAIL, M.B., B.R. WALTHER and R.H. WILLIS, 2003. The effect of experience on security analyst underreaction. Journal of Accounting and Economics. [Cited by 13]
13. DAVID, A. and P. VERONESI, 1999. … : Theory and Evidence on the Dynamics of Implied Volatilities and Over-/Underreaction in the Options …. [Cited by 10]
14. IKENBERRY, D., J. LAKONISHOK and T. VERMAELEN, 1995. Market underreaction to open market repurchases. Journal of Financial Economics. [Cited by 8]
15. KADIYALA, P. and P.R. RAU, 2004. Investor Reaction to Corporate Event Announcements: Underreaction or Overreaction?. The Journal of Business. [Cited by 7]

Bibliography

• ABARBANELL, J. and R. LEHAVY, 2000. Analysts'forecast errors and prior earnings news: firm action or analyst underreaction. [Cited by 2]
• ABARBANELL, J. and R. LEHAVY, 2003. … Role of Reported Earnings in Explaining Apparent Bias and Over/Underreaction in Analysts' Earnings …. Journal of Accounting and Economics. [Cited by 34]
• ABARBANELL, J., M. BISHOP and R. LEHAVY, 2000. Analysts'Underreaction to Prior Firm Performance and Intertemporal Variation in Forecast Bias: The …. [Cited by 3]
• ABARBANELL, Jeffry S. and Victor L. BERNARD, Tests of Analysts' Overreaction/Underreaction to Earnings Information as an Explanation for Anomalous Stock Behavior
• AKHIGBE, A., S.J. LARSON and J. MADURA, 2002. Market Underreaction and Overreaction of Technology Stocks. The Journal of Psychology and Financial Markets. [not cited]
• AMIR, E. and Y. GANZACH, 1998. Overreaction and underreaction in analysts' forecasts. Journal of Economic Behavior and Organization. [Cited by 14]
• AMIR, E., ansd Ganzach, Y.,‘Overreaction and underreaction in analysts forecasts'. Journal of Economic Behaviour & Organization. [Cited by 1]
• AMIR, Eli and Yoav GANZACH, Overreaction and Underreaction in Analysts' Forecasts
• BAIK, B.O.K., 2003. A Re-examination of Analyst Underreaction. [Cited by 1]
• BARBERIS, N. and S. ANDRE, cago. Robert Vishny, 1996, A model of investor sentiment with both underreaction and overreaction. Working paper, University of C. [Cited by 1]
• BARBERIS, N., A. SHLEIFER and R. VISHNY, 1996. A model of investor sentiment with both underreaction and overreaction. [Cited by 1]
• BARBERIS, Nicholas, Andrei SHLEIFER and Robert VISHNY, A Model of Investor Sentiment
• BARBERIS, Nicholas, Andrei SHLEIFER and Robert VISHNY, A model of investor sentiment
• BASU, S. and S. MARKOV, 2002. Another Look at Underreaction and Overreaction by Financial Analysts to Past Earnings Information. [Cited by 2]
• BENOU, G., 2003. Market Underreaction to Large Stock Price Declines: The Case of ADRs. Journal of Behavioral Finance. [not cited]
• BOEHME, R.D. and S.M. SORESCU, 2002. The Long-run Performance Following Dividend Initiations and Resumptions: Underreaction or Product of …. The Journal of Finance. [Cited by 24]
• BOEHME, R.D., B.R. DANIELSEN and S.M. SORESCU, 2002. Stock Split Post-Announcement Returns: Underreaction of Market Friction?. [not cited]
• CALADO, J.P.T. and M.T.M. GARCIA, … Market Hypothesis and the Anomalies of Long-Term Overreaction and Underreaction: The Study of the …. pascal.iseg.utl.pt. [not cited]
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• CHAN, L.K., N. JEGADEESH and J. LAKONISHOK, 1996. Momentum strategy. Journal of Finance. [Cited by 2]
• CHOI, W. and J.W. KIM, 2001. Underreaction, Trading Volume, and Post-Earnings Announcement Drift. [Cited by 1]
• COHEN, Randolph B., Paul A. GOMPERS, Tuomo VUOLTEENAHO, Who Underreacts to Cash-Flow News? Evidence from Trading between Individuals and Institutions
• COHEN, Randolph B., Paul A. GOMPERS, Tuomo VUOLTEENAHO, Who underreacts to cash-flow news? evidence from trading between individuals and institutions
• CONSTANTINOU, C., W. FORBES and L.E.N. SKERRATT, 2003. Analyst Underreaction in the United Kingdom. Financial Management. [not cited]
• CONSTANTINOU, C.P., W.P. FORBES and L. SKERRATT, 2000. Analyst underreaction to past information about earnings: reporting, processing or plain old …. [Cited by 1]
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• DAVID, A. and P. VERONESI, 1999. … : Theory and Evidence on the Dynamics of Implied Volatilities and Over-/Underreaction in the Options …. [Cited by 10]
• DAVID, A. and P. VERONESI, 1999. … : Theory and Evidence on the Dynamics of Implied Volatility and Over/-Underreaction in the Options …. [Cited by 1]
• DENIS, D.J., et al., 2004. Entrepreneurial Finance. Journal of Corporate Finance. [Cited by 14]
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• DREMAN, D. and M. BERRY, 1995. Overreaction, underreaction, and the low-P/E effect. Financial Analysts Journal. [Cited by 16]
• DRIJVER, S.J. and A.R. SOETEVENT, One-sided underreaction in stock prices. eco.rug.nl. [not cited]
• DRIJVER, Sibrand J. and Adriaan R. SOETEVENT, One-sided underreaction in stock prices
• DUGAR, A., R. ESPAHBODI and H. TEHRANIAN, 2001. Further evidence on optimism and underreaction in analysts' forecasts. Review of Financial Economics. [Cited by 1]
• EBERHART, A.C., W.F. MAXWELL and A.R. SIDDIQUE, 2004. An Examination of Long-Term Abnormal Stock Returns and Operating Performance Following R & D …. The Journal of Finance. [Cited by 4]
• ESPAHBODI, R., A. DUGAR and H. TEHRANIAN, 2001. Further evidence on optimism and underreaction in analysts' forecasts. Review of Financial Economics. [Cited by 3]
• ESPAHBODI, Reza, Amitabh DUGAR and Hassan TEHRANIAN, Further evidence on optimism and underreaction in analysts' forecasts
• FAMA, Eugene F., Market efficiency, long-term returns, and behavioral finance
• FINANCE, B., 2003. Book Review. European Finance Review. [not cited]
• FORBES, W.P. and L.C.L. SKERRATT, 2001. Overreaction In Analysts Forecasts of earnings: evidence From UK Individual Analysts' Forecasts. [Cited by 1]
• FULLER, Russell J., Behavioral Finance and the Sources of Alpha
• GOTO, S. and W. TOROUS, Is Seeing Believing? Over-and Underreaction as Fully Rational Responses to Large Signals. dmsweb.moore.sc.edu. [not cited]
• HARRISON, H. and J.C. STEIN, 1999. A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets. Journal of Finance. [Cited by 3]
• HIRSCHEY, M. and V.J. RICHARDSON, 2003. Investor Underreaction to Goodwill Write-Offs. Financial Analysts Journal59. [Cited by 2]
• HIRSCHEY, M., Z.V. PALMROSE and S. SCHOLZ, 2003. Long-term Market Underreaction to Accounting Restatements. University of Kansas. [Cited by 1]
• HOLLIS, C., 1995. Childhood antecedents of schizophrenia. BMJ. [not cited]
• HONG, and C. JEREMY, Vo1. Stein, 1999," A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets …. Journal of Financ. [Cited by 1]
• HONG, H. and J. STEIN, 1999 , A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets, …. Journal of Finance. [Cited by 2]
• HONG, H. and J. STEIN, A Uni ed Theory of Underreaction. Momentum Trading and Overreaction in Asset Markets Journal …. [Cited by 1]
• HONG, H. and J. STEIN, Forthcoming 1999.“A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset …. Journal of Finance. [Cited by 1]
• HONG, H. and J. STEIN, 1996. A Unified Theory of underreaction, momentum trading [36] Maines, L. and J. Hand. [Cited by 1]
• HONG, H. and J. STEIN, 1999. A unified theory of underreaction, overreaction, and momentum trading. Journal of Finance. [Cited by 1]
• HONG, H. and J. STEIN, 1999. A Unified Theory of Underreaction. Momentum Trading and. [Cited by 4]
• HONG, H. and J.C. STEIN, 1997. A unified theory of underreaction, momentum trading, and overreaction in asset markets, manuscript. [Cited by 2]
• HONG, H. and J.C. STEIN, 1999. ''A Unified Theory of Underreaction, Momentum Trading and Overreaction in Financial Markets' …. Journal of Finance. [Cited by 2]
• HONG, H. and J.C. STEIN, 1999. A unified theory of underreaction, momentum trading and overreaction in asset markets. The Journal of Finance. [Cited by 363]
• HONG, Harrison and Jeremy C. STEIN, A Unified Theory of Underreaction, Momentum Trading and Overreaction in Asset Markets
• HONG, Harrison and Jeremy C. STEIN, A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets
• IKENBERRY, D. and J. LAKONISHOK, T. Vermaelen, 1995,“Market Underreaction to Open Market Repurchases”. Journal of Financial Economics. [Cited by 1]
• IKENBERRY, D. and S. RAMNATH, 2000. Underreaction. [Cited by 4]
• IKENBERRY, D., J. LAKONISHOK and T. VERMAELEN, 1990. Market underreaction to open [36] Morck, R. A. Shleifer, and R. Vishny. [Cited by 1]
• IKENBERRY, D., J. LAKONISHOK and T. VERMAELEN, 1994. Market underreaction to open market repurchases, Rice University Jesse H. Jones Graduate School of Administration Working Paper No. [Cited by 2]
• IKENBERRY, D., J. LAKONISHOK and T. VERMAELEN, 1995. Market underreaction to open market repurchases. Journal of Financial Economics. [Cited by 8]
• IKENBERRY, D.L. and S. RAMNATH, 2002. Underreaction to Self-Selected News Events: The Case of Stock Splits. Review of Financial Studies. [Cited by 19]
• IKENBERRY, D.L., J. LAKONISHOK and T. VERMAELEN, 1994. Market underreaction to open market share repurchases. [Cited by 254]
• IKENBERRY, David, Josef LAKONISHOK and Theo VERMAELEN, Market underreaction to open market share repurchases
• IN, S., P.S.T. ACCESS and S. UP, Discussion of" Underreaction to Self-Selected News Events. [not cited]
• IN, S., P.S.T. ACCESS and S. UP, Underreaction to Self-Selected News Events: The Case of Stock Splits. [not cited]
• IS, W., Understanding Momentum John Y. Campbell Managing Partner, Research, Arrowstreet Capital, LP and Otto …. arrowstreetcapital.com. [not cited]
• JACKSON, A. and T. JOHNSON, 2002. Unifying underreaction anomalies. [Cited by 1]
• JEGADEESH, N. and S. TITMAN, 1995. Overreaction, delayed reaction, and contrarian profits. Review of Financial Studies. [Cited by 56]
• JEGADEESH, Narasimhan and Sheridan TITMAN, Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency
• JOHNSON, T.C. and A. JACKSON, 2002. Unifying Underreaction Anomalies. [Cited by 2]
• JOHNSSON, Malena, Henrik LINDBLOM and Peter PLATAN, Behavioral Finance - And the Change of Investor Bubble At the End of the 1990s
• KADIYALA, P. and P.R. RAU, 2004. Investor Reaction to Corporate Event Announcements: Underreaction or Overreaction?. The Journal of Business. [Cited by 7]
• KADIYALA, Padma and P. Raghavendra RAU, It's All Under-Reaction
• KANG, J.K., et al., 1999. The underreaction hypothesis and the new issue puzzle: evidence from Japan. Review of Financial Studies. [Cited by 38]
• KARAMANOU, I., 2001. Is analyst optimism intentional? Additional evidence on the existence of reporting, and selection …. [Cited by 3]
• KIM, Y.C., J.K. KANG and R.M. STULZ, 1999. The underreaction hypothesis and the new issue puzzle: Evidence from Japan. Review of Financial Studies, forthcoming. [Cited by 1]
• KIMBROUGH, M.D., The Effect of Conference Calls on Analyst and Market Underreaction to Earnings Announcements. papers.ssrn.com. [not cited]
• LARSON, S.J. and J. MADURA, 2001. Overreaction and underreaction in the foreign exchange market. Global Finance Journal. [not cited]
• LARSON, S.J. and J. MADURA, 2003. What Drives Stock Price Behavior Following Extreme One-Day Returns. Journal of Financial Research. [Cited by 5]
• LARSON, S.J., 1998. Announcement-specific stock market and currency market overreaction and underreaction. [not cited]
• LARSON, Stephen J. and Jeff MADURA, Overreaction and underreaction in the foreign exchange market
• LIM, S.S., Analysts'Reputational Concerns and Underreaction to Public News: Theory and Evidence. mozart.depaul.edu. [not cited]
• MADURA, J. and N. RICHIE, 2004. Overreaction of Exchange-Traded Funds During the Bubble of 1998-2002. Journal of Behavioral Finance. [not cited]
• MCDERMOTT, P.A., 1980. Prevalence and constituency of behavioral disturbance taxonomies in the regular school population. Journal of Abnormal Child Psychology. [Cited by 1]
• MCNALLY, W., B.F. SMITH and T. BARNES, 2002. Underreaction, Abnormal Returns and Supply Curve Elasticity: Evidence from Open Market Share …. [Cited by 1]
• MIKHAIL, M.B., B.R. WALTHER and R.H. WILLIS, 2001. The Effect of Experience on Security Analyst Underreaction and Post-Earnings-Announcement Drift. Working aper, Duke University. [Cited by 4]
• MIKHAIL, M.B., B.R. WALTHER and R.H. WILLIS, 2003. The effect of experience on security analyst underreaction. Journal of Accounting and Economics. [Cited by 13]
• MOERSCHEN, T. and D. SCHIERECK, 2003. Underreaction, overreaction, adaptive efficiency, and the German stock market. Academy of Economics and Finance-Paper and Proceedings. [Cited by 1]
• MOERSCHEN, T. and D. SCHIERECK, 2003. Underreaction. Overreaction, Adaptive Efficiency, and the German Stock …. [Cited by 4]
• NGUYEN, P., 2003. Market Underreaction and Predictability in the Cross-section of Japanese Stock Returns. Manuscript, University of New South Wales, Sydney. [Cited by 1]
• OHIOLINK, E.T.D., Title Empirical Studies in Finance Author ZHOU, XU-SHEN Degree PhD, University of Cincinnati, …. ohiolink.edu. [not cited]
• PARK, H., E.F. PIERZAK and H.L. CHEN, Do Stock Index Futures Prices Overreact?: An Event Study. papers.ssrn.com. [not cited]
• POTESHMAN, A.M., 2001. Underreaction, Overreaction, and Increasing Misreaction to Information in the Options Market. The Journal of Finance. [Cited by 25]
• POTESHMAN, Allen M., Underreaction, Overreaction, and Increasing Misreaction to Information in the Options Market
• RAEDY, J.S. and P. SHANE, 1999. Analyst and Investor Underreaction to Information about Future Earnings: Tests for a Horizon Effect. Working Paper, University of Colorado, Decembe. [Cited by 4]
• RAEDY, J.S. and P.B. SHANE, 2000. Horizon-Dependent Conservatism Bias in Financial Analysts' Earnings Forecasts. [Cited by 1]
• RAEDY, J.S., P. SHANE and Y. YANG, 2003. Horizon-Dependent Underreaction in Financial Analysts' Earnings Forecasts. University of Colorado Mimeograph, September. [Cited by 2]
• RIAHI-BELKAOUI, A., 2002. The Effect of Multinationality on Security Analyst Underreaction. Journal of Business Finance & Accounting. [not cited]
• SCHNUSENBERG, O. and J. MADURA, 2001. Do US Stock Market Indexes Over-or Underreact?. Journal of Financial Research. [Cited by 1]
• SHANE, P. and P. BROUS, 1996. Can analyst underreaction to earnings information explain anomalous stock price behavior?. [Cited by 1]
• SHANE, P. and P. BROUS, 2001. Investor and(Value Line) Analyst Underreaction to Information about Future Earnings: The Corrective …. Journal of Accounting Research. [Cited by 14]
• SHANE, Philip and Peter BROUS, Investor and (Value Line) Analyst Underreaction to Information about Future Earnings: The Corrective Role of Non-Earnings-Surprise Information
• SHEFRIN, Hersh, Beyond Greed and Fear : Understanding Behavioral Finance and the Psychology of Investing.
• SKERRATT, Len, Behavioural explanations for under and overreaction
• SKERRATT, Len, Are analysts responsible for post earnings announcement drift and other anomalies that suggest that the market generally adjusts inadequately to new information?
• SPYROU, S., K. KASSIMATIS and E. GALARIOTIS, Short-term Overreaction, Underreaction and Efficient Reaction: Evidence from the London Stock …. efmaefm.org. [not cited]
• STULZ, R., J. KANG and Y. KIM, 1999. The underreaction hypothesis and the new issue puzzle: evidence from Japan. Review of Financial Studies. [not cited]
• TAFFLER, R., J. LU and A. KAUSAR, In Denial? Stock Market Underreaction to Going-concern Audit Report Disclosures. papers.ssrn.com. [not cited]
• TAFFLER, R., J. LU and A. KAUSAR, 2004. In denial? Market underreaction to going-concern audit report disclosures. forthcoming Journal of Accounting and Economics. [Cited by 3]
• TAFFLER, R.J., J. LU and A. KAUSAR, 2004. In state of denial? Market underreaction to going-concern audit report disclosures. [Cited by 1]
• THEOBALD, Michael and Peter YALLUP, Determining security speed of adjustment coeffcients
• TITMAN, S., 2002. Discussion of “Underreaction to Self-Selected News Events”. Review of Financial Studies. [Cited by 2]
• TITMAN, S., 2002. Discussion of(quote) Underreaction to Self-Selected News Events (quote). Review of Financial Studies. [not cited]
• VAN, R.D., 1993. An investigation and partial explanation of systemic underreaction of stock prices to new …. [not cited]
• VERMAELEN, T., Citations of. ideas.repec.org. [not cited]
• VERMAELEN, T., Information about:. ideas.repec.org. [not cited]
• VISSING-JORGENSON, A., 2003. Behavioral Finance: An Impartial Assessment or: Does Irrationality Disappear with Wealth? Evidence …. NBER Macroeconomics Annual. [Cited by 3]
• ZHANG, F., 2004. Information Uncertainty and Analyst Forecast Behavior. [Cited by 1]
• ZHANG, Y., Analysts'Responsiveness and Market Underreaction to Earnings Announcements. gsb.columbia.edu. [Cited by 1]