Market overreaction on the English stock market

The purpose of the paper is to investigate the existence of both short term and medium term market overreaction on the Finnish stock market. By looking at market reactions following large stock price movements we find support for the short term market overreaction hypothesis for initial negative movements. The overreaction is independent of the size of the initial price movement, but seems to be larger during time periods of positive market sentiment. However, we do not find any clear overreaction following initial large positive price movements. By testing a trading strategy based upon the dividend yield, and specifically stocks with high dividend yields, we test for a medium term stock market overreaction. The trading strategy itself was successful, but lie results obtained could not be Linked to a market overreaction.