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A market hypothesis stating that investors and traders react
% G( P2 R0 S) b. U4 K: c* C3 ]) S8 Udisproportionately to new information about a given security.2 G! n, e# R5 I0 p N2 k
This will cause the security's price to change dramatically,7 h3 j/ t& [1 x: w( t7 B
so that the price will not fully reflect the security's true' ], r3 f: j. r8 F' R* x" R4 q
value immediately following the event. Typically, the price
0 ]/ A L' ~6 [& oswing from overreaction is not long lasting, as the stock5 b8 @, h* E% p' c
price will tend to return back to its true value over time.( k/ \" n. `/ `* _
" a4 R- h1 G3 P Q, i6 a$ nThe overreaction hypothesis is not consistent with the
1 M: ~% o5 d0 x! t: Jefficient market hypothesis. |