Evaluating Stock Price Behavior after Events: An Application of the Self-Exciting Threshold Autoregressive Model

Introduction After events have occurred, stock returns show a decisive pattern of continuation in semi-annual and annual holding periods while there is evidence of reversal over three to five years. (1) Over a weekly horizon, Lehmann (1990) demonstrates contrarian profits, but subsequent studies attribute his profits to cross-autocorrelation in large and small stocks and bid-ask bounce [e.g., Lo and MacKinlay (1990); Conrad, Gultekin, and Kaul...