One of the assumptions of efficient market is that investors react to new information. The evidence show that investors overreact to new information .Thay tend to be either over-optimitic or over- pessimistic. Therefore equity prices are not equitably determined by the “true “ forces of market supply / demand and are not in equilibrium most of the time .Although stock prices would go abnormally high (low) due to Investors’ Overreaction in the initial period , thay have a tendency to adjust themselves back to the equilibrium level in the subsequent period.
This research investigate The Investors’ Overreaction In the Tehran Stock Exchange. The results indicate that stocks in the best (worest) performing experience, a reversal of fortune in the following years.
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