Opening returns, noise and overreaction

Patricia L. Chelley-Steeley

Research output: Contribution to journalArticlepeer-review


In this article a partial-adjustment model, which shows how equity prices fail to adjust instantaneously to new information, is estimated using a Kalman filter. For the components of the Dow Jones Industrial 30 index I aim to identify whether overreaction or noise is the cause of serial correlation and high volatility associated with opening returns. I find that the tendency for overreaction in opening prices is much stronger than for closing prices; therefore, overreaction rather than noise may account for differences in the return behavior of opening and closing returns.
Original languageEnglish
Pages (from-to)513-521
Number of pages9
JournalJournal of Financial Research
Issue number4
Publication statusPublished - 2001


  • equity prices
  • adjustment
  • Kalman filter
  • overreaction
  • high volatility
  • opening returns


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