The ACAR for the arbitrage portfolio is the difference between the low liquidate and high liquidate portfolios (i.
As dictated by the overreaction hypothesis, if there is significant return for the arbitrage portfolio (ACARlow liquidate-ACARhigh liquidate > 0), then overreaction is present in the market.
Trading volume may have elements of firm size high liquidate with it such that any finding obtained from the analysis could have resulted from trading volume and /or size.
As portfolios are formed each week, the results presented in the follow high liquidate sections are the average of 591 test periods.
Overall, there are disproportionate levels of reversal for high liquidate and low liquidate portfolios.
The last row in Table 2 provides the difference in ACAR between the low liquidate and high liquidate for the various holding periods.
The severely limited sample size of 47 stocks and the small number of stocks in the low liquidate-high liquidate portfolio could have caused the lower and less significant returns that were documented by Mohd Arifin and Power .
Similarly, low liquidate portfolios experience immediate reversals, as evidenced by the positive returns in the post-formation week.
Interestingly, the reversals for low liquidate are also present predominantly for up to 4 weeks.
For the low liquidate stocks is higher than for the high liquidate stocks.