"In predicting the future, people tend to get anchored by salient past events. Consequently, they underreact."Shefrin [book]
"The underreaction evidence shows that security prices underreact to news such as earnings announcements. If the news is good, prices keep trending up after the initial positive reaction; if the news is bad, prices keep trending down after the initial negative reaction."
"The momentum evidence briefly described in Chapter 1 is closely related to underreaction, since the positive autocorrelations of returns over relatively short horizons may reflect slow incorporation of news into stock prices."
Shleifer [book] p112
Shleifer [book] p112
Top 15 Underreaction Papers
1. HONG, H. and J.C. STEIN, 1999. A unified theory of underreaction, momentum trading and overreaction in asset markets. The Journal of Finance.
2. IKENBERRY, D.L., J. LAKONISHOK and T. VERMAELEN, 1994. Market underreaction to open market share repurchases.
3. JEGADEESH, N. and S. TITMAN, 1995. Overreaction, delayed reaction, and contrarian profits. Review of Financial Studies.
4. KANG, J.K., et al., 1999. The underreaction hypothesis and the new issue puzzle: evidence from Japan. Review of Financial Studies.
5. ABARBANELL, J. and R. LEHAVY, 2003. … Role of Reported Earnings in Explaining Apparent Bias and Over/Underreaction in Analysts' Earnings …. Journal of Accounting and Economics.
6. POTESHMAN, A.M., 2001. Underreaction, Overreaction, and Increasing Misreaction to Information in the Options Market. The Journal of Finance.
7. BOEHME, R.D. and S.M. SORESCU, 2002. The Long-run Performance Following Dividend Initiations and Resumptions: Underreaction or Product of …. The Journal of Finance.
8. IKENBERRY, D.L. and S. RAMNATH, 2002. Underreaction to Self-Selected News Events: The Case of Stock Splits. Review of Financial Studies.
9. DREMAN, D. and M. BERRY, 1995. Overreaction, underreaction, and the low-P/E effect. Financial Analysts Journal. [Cited by 16]
10.AMIR, E. and Y. GANZACH, 1998. Overreaction and underreaction in analysts' forecasts. Journal of Economic Behavior and Organization.
11.SHANE, P. and P. BROUS, 2001. Investor and(Value Line) Analyst Underreaction to Information about Future Earnings: The Corrective …. Journal of Accounting Research.
12. MIKHAIL, M.B., B.R. WALTHER and R.H. WILLIS, 2003. The effect of experience on security analyst underreaction. Journal of Accounting and Economics.
13. DAVID, A. and P. VERONESI, 1999. … : Theory and Evidence on the Dynamics of Implied Volatilities and Over-/Underreaction in the Options ….
14. IKENBERRY, D., J. LAKONISHOK and T. VERMAELEN, 1995. Market underreaction to open market repurchases. Journal of Financial Economics.
15. KADIYALA, P. and P.R. RAU, 2004. Investor Reaction to Corporate Event Announcements: Underreaction or Overreaction?. The Journal of Business.
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