P-20 The Relationship between the Magnitude of Single-day Stock Price Declines and Subsequent Abnormal Returns

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We investigate the relationship between the magnitude of large single-day stock price declines and their subsequent abnormal returns. We select 444 events in which securities traded on the New York Stock Exchange experienced a decline of greater than 10% on any trading day during the period of July 1, 2017 to June 30. 2018 and calculate their Cumulative Abnormal Returns at 10 trading days, 1 month, 3 months, and 6 months after each event date. Based on our regressions, we find no statistically-significant relationship linking larger initial share price declines to greater subsequent abnormal returns. We conclude that investors should not consider the size of initial decline in NYSE securities when designing a trading strategy centered around “buying the dip.”