An examination of the daily top three gainers and losers at the Philippine stock exchange for the first three-quarters of 1998 (02 Jan 1998-07 Oct. 1998)

• Main Authors: Cabral, Voltaire, Sy, Dexter Allan, Young, Janelle
• Format: text
• Language: English
• Published: Animo Repository 1999
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/17091
• Institution: De La Salle University

The proponents examine the behavior of stock prices listed in the Philippines Stock Exchange (PSE) that experienced the largest percentage gains (winners) and declines (losers) in the short-run (three days). Top three winners and losers published in the PSE during the first three quarters of 1998 (02 January 1998-10 October 1998) are selected. The proponents found evidence that the Philippine Stock Market overreacts to bad news in the short-run. There is also weak evidence that the Philippine Stock Market overreacts to good news. Moreover, cumulative stock price changes are abnormally high for three days immediately after the large price decline. A test for market efficiency by using bid-ask spreads, which represent the minimum cost of transacting, is obtained. The overall results indicate that stock price changes during the reversal period are greater than the average relative spreads especially for losers. These results are consistent with the overreaction hypothesis. Therefore, evidence shows that the Philippine Stock Market is not weak-from efficient even after transaction costs are considered. This can be attributed to the large magnitude of price reversals compared to the average relative spreads. This is more profound in the losers' sample. Thus, investors (with a holding period of one to three days) have opportunities to earn excess profits, net of transaction costs immediately after the announcement date. Furthermore, the proponents recommend that investors (with a holding period of one to three days) invest in industries that have frequently announced advances (winning stocks) or declines (losing stocks) in order to further maximize their potentials of earning profits.