Short-term stock price reversals after extreme downward price movements

We studied the intraday effects of return overreactions around extreme negative one-minute interval returns of Nasdaq100 constituents based on nanosecond data. An extreme negative one-minute interval return is defined as the lowest return that occurs once in 1,000 one-minute intervals. We document that 31% of such an extreme one-minute interval's return is reversed in the subsequent trading minute. The relative magnitude of the reversal after extreme negative one-minute interval returns is particularly high for the 20% most liquid and the 20% largest firms of our sample. (c) 2021 The Author(s). Published by Elsevier Inc. on behalf of Board of Trustees of the University of Illinois. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/ 4.0/).