Abstract: I present evidence of predictability in a sample constructed to minimize concerns about time-varying risk premia and market-microstructure effects. I use filter-rules on lagged return and laggd volume information to uncover weekly overreaction profits on large-capitalization NYSE and AMEX securities. I find that decreasing-volume stocks experiencing greater reversals. Increasing-volume stocks exhibit weaker reversals and positive sutocorrelation. A real-time simulation of the filter strategies suggests that an investor who pursues the filter strategy with relatively low transaction costs will strongly outperform an investor who follows a buy-and-hold strategy.
Author: Michael cooper
Filter Rules Based on Price and Volume in Individual Security Overreaction.PDF
