This study examines whether stock returns in the Korean stock market exhibit negative serial correlation over long horizons, and if so, whether this pattern is attributable to investor overreaction—which would constitute compelling evidence against the efficient market hypothesis—or to systematic changes in expected returns under an efficient market. Using monthly returns of all stocks continuously listed during the portfolio formation periods over a 14-year research period from 1980 to 1993, the empirical results indicate that statistically significant negative serial correlation exists between the abnormal returns of portfolios, as measured by Ibbotson's RATS, across three-year portfolio formation and test periods. The results also show that this negative serial correlation can be explained by changes in beta attributable to changes in leverage between the formation and test periods. Meanwhile, the abnormal returns during the test period, after adjusting for changes in beta between winner and loser portfolios formed based on the magnitude of realized returns during the formation period, do not show statistically significant values. These findings strongly suggest that the negative serial correlation of stock returns over long horizons is not caused by an overreaction phenomenon that would negate weak-form market efficiency, but rather is attributable to abnormalities in equilibrium expected returns—that is, required rates of return—resulting from changes in beta under an efficient market.