• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2010 Vol.1(4): 325-330 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2010.V1.58

Overreact Analysis in the American Stock Market: A Fuzzy C-means Algorithm Approach

Renato Aparecido Aguiar and Roberto Moura Sales
Abstract—In this paper, empirical tests, based on the fuzzy clustering means algorithm for the analysis of overreaction and underreaction hypothesis in the American stock market are presented. Such methodology is strongly connected with two heuristics of behavioral finance theory: representativeness heuristic and anchoring heuristic. The proposed methodology is used to form portfolios through financial ratios of public companies and the results obtained are consistent with the strong influence of overreaction in the American stock market. The analysis is applied for stocks from oil and gas, textile and, steel and iron sectors, with financial indexes ranging from 1999 to 2007.

Index Terms—Behavioral Finance, Fuzzy Clustering Means, Overreaction, Underreaction.

Renato Aparecido Aguiar is with the Centro Universitário da FEI, Dept of Electrical Engineering (e-mail: preraguiar@fei.edu.br).
Roberto Moura Sales is with the Escola Politécnica da USP, Dept of Electrical Engineering (e-mail: roberto@lac.usp.br).

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Cite:Renato Aparecido Aguiar and Roberto Moura Sales, "Overreact Analysis in the American Stock Market: A Fuzzy C-means Algorithm Approach," International Journal of Trade, Economics and Finance vol.1, no.4, pp. 325-330, 2010.

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