Empirical research by DeBondt and Thaler (1985),Jagadeesh (1990)and Lehman (1990)
A) found that poorly stocks that performed poorly in one period experienced sizable reversals in the subsequent period
B) found that stocks that performed poorly in one period experienced poor performance in the subsequent period
C) found that stocks that performed poorly in one period experienced neither better nor worse performance than other stocks in the subsequent period
D) did not try to test the reversal effect
E) reinforces the EMH

Question

Quizplus · Accepted Answer

Empirical research by DeBondt and Thaler (1985), Jagadeesh (1990), and Lehman (1990) found evidence of the short-term reversal effect, where poorly performing stocks in one period tend to experience sizable reversals in the subsequent period. This contradicts the weak-form Efficient Market Hypothesis (EMH), which suggests that past prices and returns cannot be used to predict future prices and returns.

Empirical Research by DeBondt and Thaler (1985),Jagadeesh (1990)and Lehman (1990)