Download or read book Recency Bias and Post Earnings Announcement Drift written by Qingzhong Ma and published by . This book was released on 2014 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we examine the role of the timing of 52-week high, or recency, in the post earnings announcement drift (PEAD) puzzle. We argue that, because investors are less likely to bid up (down) a stock price if a stock's 52-week high occurred in the recent (distant) past, these stocks are underpriced (overpriced) and earn higher (lower) future returns. We report these findings. First, PEAD profits are mainly driven by recency bias. An enhanced strategy based on both PEAD and recency accounts for 74% of total PEAD profits. Second, the recency bias accounts for the entire PEAD profits of large stocks and of the recent 24 years. The effect of recency bias on PEAD exists even after controlling for price proximity to 52-week high. Our evidence suggests that recency bias plays an important role in PEAD.
Download or read book Post Earnings Announcement Drift and Market Participants Information Processing Biases written by Lihong Liang and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research has been unable to explain the phenomenon known as post-earnings announcement drift, raising questions concerning the semi-strong form efficiency of the market typically assumed in capital market research. This study contributes to our understanding of this anomaly by examining drift in the context of theories that consider investors' non-Bayesian behaviors. The empirical evidence reveals that investors' overconfidence about their private information and the reliability of the earnings information are two important factors that explain drift. Finally, this study also provides insight into the puzzling relationship between dispersion and drift discussed in prior research.
Download or read book Post Earnings Announcement Drift written by Tomas Tomcany and published by LAP Lambert Academic Publishing. This book was released on 2010-11 with total page 92 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is a well documented finding in finance theory that share prices drift in the direction of firms' unexpected earnings changes, a phenomenom known as post-earnings announcement drift, or earnings momentum. In this book, I study the stock prices' reaction to firms' quarterly earnings announcements. The book shows that the timeframe in which the drift occurs is related to the size of a firm and is limited in time after the earnings announcement. I further analyze the effect of the number of analysts covering a firm on the magnitude and persistance of post-earnings announcement drift. I document that recent analyst coverage predicts large drifts after the earnings announcements. I suggest several possible explanations, but the evidence seems most consistent with recent analyst coverage providing information about investor (or analyst) expectations regarding firm's future earnings. This book should be useful to professionals in Financial Economics, especially to those interested in Behavioral Finance in stock markets, but also to equity analysts, traders or investors interested in the stocks' response to earnings news.
Download or read book Do Individual Investors Cause Post Earnings Announcement Drift Direct Evidence from Personal Trades written by David A. Hirshleifer and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study tests whether naiquest;ve trading by individual investors, or some class of individual investors, causes post-earnings announcement drift (PEAD). Inconsistent with the individual trading hypothesis, individual investor trading fails to subsume any of the power of extreme earnings surprises to predict future abnormal returns. Moreover, individuals are significant net buyers after both negative and positive extreme earnings surprises, consistent with an attention effect, but not with their trades causing PEAD. Finally, we find no indication that trading by individuals explains the concentration of drift at subsequent earnings announcement dates.
Download or read book Why Does the Post Earnings Announcement Drift Last for So Long An Explanation Based on the Investors Beliefs written by Xin Cui and published by . This book was released on 2014 with total page 65 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the role of investors' beliefs in determining the post earnings announcement drift (PEAD). Specifically, we propose a technique to estimate the belief parameters of the informed and uninformed investors, based on which we define the uninformed investors' information acceptance ratio (IAR). We demonstrate that IAR is a key factor determining the length of PEAD. IAR also explains the post announcement returns and the risk increases. Furthermore, we show that the earnings announcements contain both the hard and soft information. The hard information reduces uncertainty, whereas the soft information enhances uncertainty. And the latter effect dominates the former.
Download or read book The Effect of Corporate Disclosure on the Post earnings Announcement Drift written by Amir Guttman and published by . This book was released on 1994 with total page 302 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Investor Inattention and the Post earnings Announcement Drift Evidence from Switzerland written by Sarah Suter and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Earlier studies on earnings numbers have discovered a market anomaly which could not be explained by flaws in the applied research design. They claim that stock prices do not incor-porate earnings news immediately, as suggested by the efficient market theory, but tend to drift into the direction of the unexpected earnings after an earnings announcement. In addi-tion, this effect seems to be stronger if investors are distracted by competing announcements at the announcement date. Based on Swiss earnings and stock price data, this paper analyses whether unexpected earnings are followed by cumulative abnormal stock returns. I find post-earnings announcement drift that increases with the magnitude of the earnings surprise. By comparing immediate and delayed market reaction and post-earnings announcement drift on high-news and low-news days, this study examines the effect of investor inattention on post-earnings announcement drift. The findings are consistent with lower immediate market re-sponse and stronger drift when investors are distracted.
Download or read book STOCK PRICE REACTIONS TO EARNINGS ANNOUNCEMENTS A written by VICTOR L. BERNARD and published by . This book was released on 1992 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Presentation Slides Do Individual Investors Cause Post Earnings Announcement Drift Direct Evidence From Personal Trades written by David A. Hirshleifer and published by . This book was released on 2018 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study tests whether naïve trading by individual investors, or some class of individual investors, causes post-earnings announcement drift (PEAD). Inconsistent with the individual trading hypothesis, individual investor trading fails to subsume any of the power of extreme earnings surprises to predict future abnormal returns. Moreover, individuals are significant net buyers after both negative and positive extreme earnings surprises, consistent with an attention effect, but not with their trades causing PEAD. Finally, we find no indication that trading by individuals explains the concentration of drift at subsequent earnings announcement dates. The paper is available here: "https://ssrn.com/abstract=1120495" https://ssrn.com/abstract=1120495.
Download or read book The Effect of Short selling Constraints on Post earnings Announcement Drift written by Soojin Yim and published by . This book was released on 2002 with total page 164 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Association between Stock Splits and Post Earnings Announcement Drift written by Anthony J. Amoruso and published by . This book was released on 1999 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze changes in post-earnings announcement drift around 1,781 two-for-one or greater stock splits reported by an equal number of CRSP firms during the 1972 through 1996 time period. We find that for the smallest firms in our sample, post-earnings announcement drift is eliminated in the quarters immediately following the split. The effect is transitory, however, with drift reasserting itself beginning with the third post-split quarterly earnings announcement. The abnormal returns for the largest firms in our sample exhibit insignificant drift in both pre- and post-split periods. These results suggest that stock splits provide information that causes investors - at least temporarily - to more fully incorporate serial correlation into their earnings expectations. The differential effect noted for small and large firms is likely attributable to the richer information environment faced by larger firms, in which the signal provided by a stock split does not constitute a significant incremental contribution. Our results are inconsistent with the transactions costs explanation of drift, which predicts an increase in drift following a split that is invariant to firm size.
Download or read book Underreaction Or Overreaction written by Abdulaziz M. Alwathainani and published by . This book was released on 2017 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We test whether the well-documented post-earnings-announcement drift is a manifestation of an investor underreaction or overreaction to extremely good or bad earnings news. Using the market reaction to extreme earnings surprises (i.e., SUE) in quarter Qt as a reference point, we show that firms reporting a SUE in subsequent quarter Qt 1 that confirms their initial quarter Qt SUE ranking in the same highest or lowest SUE quintiles generate an incremental price run that moves in the same direction as that of the initial SUE. However, the price impact of the confirming SUE signal is weaker than that of its initial SUE. Our findings are robust to the Fama-French three-factor daily regression extended by the momentum factor and a number of other robustness tests. Our finding is not consistent with the prevalent view that investors underreact to earnings news. To the contrary, the results suggest an initial investor overreaction to extreme SUE signals.
Download or read book Streaks in Earnings Surprises and the Cross section of Stock Returns written by Roger Loh and published by . This book was released on 2013 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The gambler's fallacy (Rabin, 2002) predicts that trends bias investor expectations. Consistent with this prediction, we find that investors underreact to streaks of consecutive earnings surprises with the same sign. When the most recent earnings surprise extends a streak, post-earnings announcement drift is strong and significant. In contrast, the drift is negligible following the termination of a streak. Indeed, streaks explain about half of the post-earnings announcement drift in our sample. Our results are robust to more general definitions of trends than streaks and a battery of control variables including the magnitude of earnings surprises and their autocorrelation. Overall, post-earnings announcement drift has a significant time-series component that is consistent with the gambler's fallacy.
Download or read book Post Earnings Announcement Drift written by Jeroen Suijs and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Investor Trading and the Post Earnings Announcement Drift written by Benjamin C. Ayers and published by . This book was released on 2011 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine whether the two distinct post-earnings-announcement drifts associated with seasonal random walk-based and analyst-based earnings surprises are attributable to the trading activities of distinct sets of investors. We predict and find that small (large) traders continue to trade in the direction of seasonal random walk-based (analyst-based) earnings surprises after earnings announcements. We also find that when small (large) traders react more thoroughly to seasonal random walk- (analyst-) based earnings surprises at the earnings announcements, the respective drift attenuates. Further evidence suggests that delayed small trades associated with random walk-based surprises are consistent with small traders' failure to understand time-series properties of earnings, whereas delayed large trades associated with analyst-based surprises are more consistent with a longer price discovery process. We also find that the analyst-based drift has declined in recent years.
Download or read book Anchoring the 52 Week High and Post Earnings Announcement Drift written by Thomas J. George and published by . This book was released on 2017 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: The existence of post earnings announcement drift (PEAD) depends strongly on whether stocks' prices are near (far from) their 52-week highs when positive (negative) earnings surprises arrive. We find that the coincidence of these two effects is what generates significant PEAD. Daily returns around current and future earnings announcements follow a similar pattern -- announcement returns are more muted for extreme positive (negative) surprises, the closer (farther) are prices to the 52-week high. In addition, subsequent announcement returns are greater for these firms, consistent with a correction of previous underreaction. This suggests that an important contributing factor to PEAD is investors anchoring their beliefs about fundamental value on the 52-week high, which restrains price reactions to earnings news.
Download or read book Media Coverage and Investors Attention to Earnings Announcements written by Joel Peress and published by . This book was released on 2016 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Does investors' inattention contribute to the post-earnings announcement drift? I study this question using media coverage as a proxy for attention. I compare announcements made by the same firm in the same year and generating the same earnings surprise, when one announcement is covered in the Wall Street Journal while the other is not. I find that announcements with media coverage generate a stronger price and trading volume reaction at the time of the announcement and less subsequent drift. Moreover, this effect is less pronounced for more visible firms and on high-distraction days. These results are both economically and statistically strong. They lend support to the notion that limited attention is an important source of friction in financial markets.
