Stock Prices Movement of Russian Companies after Appearance of Significant Information

Many studies show that after large one-day price changes stock prices tend to reverse in the short-term period and move in the direction that is opposite to the initial price change. Research papers suggest different explanations for the causes of this reversal effect. Despite the large number of studies examining the reversal effect, many aspects of the problem remain controversial. This paper examines the features of the short-term dynamics of stock returns after large price changes for the Russian stock market. The event study of stock returns after daily price change of 10% or more is conducted. This study also discusses the factors that influence the dynamics of stock returns after a significant price change. This study provides evidence of the strong reversal effect on the Russian stock market after both positive and negative events. The most probable cause of the reversal effect on the Russian stock market is investor’s overreaction to unexpected and dramatic events. The reversal is smaller after the news that influence value of a group of companies. After positive news the reversal is larger when the initial price change is bigger. High accuracy of negative news reduces the reversal effect.