Date of Award
Master of Science (MS)
Economics and Finance
The intent of this study is to explore short-term reversal effects in public securities markets.
The basis of this study is to take into consideration prior work done by economists, paying particularly attention to periods specifically before and after the decimalization of the stock market in 2001. This study finds that from years 1980-2000, there is a monthly return premium of -0.0552% or 5.5 basis points, which is quite significant with a t-statistic of 11.08. Following decimalization in 2001 through year 2012, this monthly return premium drops 44% to -0.031% or 3.1 basis points, again with a high t-statistic of 4.50. Despite these findings, the resulting return premium is still quite small in nature and would require large capital commitments to realize any type of meaningful return. Regardless, there inherently appears to be an arbitrage opportunity that would pique the curiosity of any rational investor and begs to be explored further.
Burgess, Timothy, "An Examination of the Short Term Reversal Premium" (2017). All Graduate Plan B and other Reports. 929.
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