... and underreaction is an ongoing one and generally consists of market microstructure, risk-related (none of which are consistent with EMH) and behavioral explanations. A number of theories based on behavioral models have attempted to explain the evidenced overreactions and under reactions based on less than rational...

..., exacerbating asset price movements (De Bondt and Thaler, 1985 , henceforth DT). Momentum strategies are based on the underreaction hypothesis, i.e. that investors react to information by less than they should, and security prices fail to adjust adequately (Jegadeesh and Titman, 1993 , henceforth JT), although...