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In the literature, it is not uncommon to view conservatism bias as a cause of asset price underreaction to new information, however, so far, no paper has suggested that conservatism bias could also cause asset price overreaction to new information. This paper constructs an equilibrium model of a competitive securities market to explain that conservatism bias is capable of generating asset price overreaction in addition to underreaction to new information. 

conservatism bias, asset price overreaction and underreaction to new information, behavioural model, competitive securities market.