OVER REACTION AND UNDERREACTION IN INDIAN STOCK MARKET: COMPARISON BASED ON ANALYSIS CONSIDERING TWO DIFFERENT SETS OF STOCKS - SHORT TERM AND LONG TERM PERSPECTIVE

The evidence on security returns challenges the traditional view that securities are rationally priced to reflect all publicly available information [1] and the stock prices equals the optimal forecast of it. The overconfidentinformed investor overweight the private signal relative to the public, causing the stock prices to overreact or underreact. Investor over-confidence and biased self-attribution lead to overreaction. The present paper is an empirical analysis that aims at comparing the Indian stock market situation with global markets. The paper also tries to identify the effect of the phenomena during periods prior to and after 2010 and considering both the long and short term perspective.