Short-term reversals: The effects of past returns and institutional exits

Si Cheng, Allaudeen Hameed, Avanidhar Subrahmanyam, Sheridan Titman

Research output: Contribution to journalArticlepeer-review

42 Scopus citations


Price declines over the previous quarter lead to stronger reversals across the subsequent 2 months. We explain this finding based on the dual notions that liquidity provision can influence reversals and that agents who act as de facto liquidity providers may be less active in past losers. Supporting these observations, we find that active institutions participate less in losing stocks and that the magnitude of monthly return reversals fluctuates with changes in the number of active institutional investors. Thus, we argue that fluctuations in liquidity provision with past return performance account for the link between return reversals and past returns. COPYRIGHT 2017, MICHAEL G. FOSTER SCHOOL OF BUSINESS, UNIVERSITY OF Washington, SEATTLE, WA.

Original languageEnglish (US)
Pages (from-to)143-173
Number of pages31
JournalJournal of Financial and Quantitative Analysis
Issue number1
StatePublished - Feb 1 2017
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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