Overreaction around DJIA Milestone Events : Evidence from an Intraday Analysis

We extend prior research by examining investor trading in individual stocks around a market level psychological anchor. We use intraday trade and quote data to examine trading in Dow component stocks around the time DJIA first crossed a millenary milestone. Prior evidence uses monthly returns and documents momentum trading around Dow 52-week high and historical highs. In spite of nine out of eleven millenary milestones in our sample that are simultaneously a Dow 52-week high and a historical high, we find that the pattern of order imbalance, spreads, and returns around milestone crossing indicates an overreaction and not momentum trading.