This article uses a nonparametric test based on the arc‐sine law (see, e.g., Feller, <link href="#bib6">1965</link>), which involves comparing the theoretical distribution implied by an intraday random walk with the empirical frequency distribution of the daily high/low times, in order to address the question of...

We develop some properties on the autocorrelation of the k-period returns for the general mean reversion (GMR) process in which the stationary component is not restricted to the AR(l) process but take the form of a general ARMA process. We then derive some properties of the GMR process and three...

In this paper, we introduce a new pseudo-Bayesian model to incorporate the impact of a financial crisis and establish some properties of stock returns and investors' behavior during a financial crisis and subsequent recovery. Our approach provides a quantitative description for investors'...

The margin system is the first line of defense against the default risk of a clearinghouse. From the perspectives of a clearinghouse, the utmost concern is to have a prudential system to control the default exposure. Once the level of prudentiality is set, the next concern will be the...

We investigate whether the US equity market exhibits underreaction or overreaction. More specifically, we study the directional and magnitude effects associated with abnormal market reaction. The directional effect is the phenomenon that an extreme price movement will be followed by a price...

This paper develops a model of weight assignments using a pseudo-Bayesian approach that reflects investors' behavioral biases. In this parsimonious model of investor sentiment, weights induced by investors' conservative and representative heuristics are assigned to observations of the earning...

We extend the overreaction study to interaction of international markets and find that intraday price reversals exist in Asian index futures markets following extreme movement in U.S. market. Profitable opportunities exist after considering transaction cost. We show that the reversal cannot be...

We show in general that risky investments become more attractive as the investment horizon (n) lengthens. Specifically, any investor's maximal expected utility directly increases with n, as well as the investor's willingness to allocate more capital to the risky assets if his optimal strategy is...