Title: Stock jump, underperformance and undervaluation: evidence from emerging market

Authors: Felizia Arni Rudiawarni; Dedhy Sulistiawan; Frendy

Addresses: Faculty of Business and Economics, University of Surabaya, Jl. Raya Kalirungkut, Surabaya, 60293, East Java, Indonesia ' Faculty of Business and Economics, University of Surabaya, Jl. Raya Kalirungkut, Surabaya, 60293, East Java, Indonesia ' NUCB Business School, Nagoya Campus, 1-3-1 Nishiki Naka, Nagoya, Aichi 460-0003, Japan

Abstract: This paper examines the ability of underperforming and undervalued stocks to stimulate stock jumps. Our study also considers firm's systematic risk as an important factor stimulating positive skewness of return which proxied for the stock jump. Using Indonesian data from 2016 until 2018, our findings show that underperforming stocks generally experience a positive stock jump in the subsequent period. Overperforming stocks that are undervalued also produce higher positive skewness of return. Our findings show that undervalued high-risk stocks are likely to trigger a stock jump. These findings have practical implications for both risk-averse and risk-seeking investors.

Keywords: stock jump; underperformance; undervaluation; risk; earnings; behavioural finance.

DOI: 10.1504/IJMEF.2022.128494

International Journal of Monetary Economics and Finance, 2022 Vol.15 No.6, pp.527 - 541

Received: 23 Dec 2021
Accepted: 06 Feb 2022
Published online: 24 Jan 2023 *

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