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Author: Sarah Suter Publisher: ISBN: Category : Languages : en Pages :
Book Description
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.
Author: Sarah Suter Publisher: ISBN: Category : Languages : en Pages :
Book Description
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.
Author: Stefano Della Vigna Publisher: ISBN: Category : Corporations Languages : en Pages : 45
Book Description
Do firms release news strategically in response to investor inattention? We consider news about earnings and analyze the response of returns to announcements on Friday and other weekdays. Friday announcements have less immediate and more delayed stock return response. The delayed response as a percentage of the total response is 60 percent on Friday and 40 percent on other weekdays. In addition, abnormal trading volume around announcement day is 10 percent lower for Friday announcements. These findings suggest that weekends distract investor attention temporarily. They support explanations of post-earning announcement drift based on underreaction to information caused by limited attention. We also document that firms release worse announcements on Friday. Friday announcements are associated with a 45 percent higher probability of a negative earnings surprise and a 50 basis points lower abnormal return. The firm-based evidence of strategic news release corroborates the investor-based evidence of inattention on Friday. The results for stock returns, volume, and strategic behavior support the hypothesis of limited attention.
Author: Stefano Della Vigna Publisher: ISBN: Category : Corporations - Public relations Languages : en Pages : 45
Book Description
Do firms release news strategically in response to investor inattention? We consider news about earnings and analyze the response of returns to announcements on Friday and other weekdays. Friday announcements have less immediate and more delayed stock return response. The delayed response as a percentage of the total response is 60 percent on Friday and 40 percent on other weekdays. In addition, abnormal trading volume around announcement day is 10 percent lower for Friday announcements. These findings suggest that weekends distract investor attention temporarily. They support explanations of post-earning announcement drift based on underreaction to information caused by limited attention. We also document that firms release worse announcements on Friday. Friday announcements are associated with a 45 percent higher probability of a negative earnings surprise and a 50 basis points lower abnormal return. The firm-based evidence of strategic news release corroborates the investor-based evidence of inattention on Friday. The results for stock returns, volume, and strategic behavior support the hypothesis of limited attention.
Author: David A. Hirshleifer Publisher: ISBN: Category : Languages : en Pages : 51
Book Description
This study tests whether naiuml;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. Presentation slides available at https://ssrn.com/abstract=3228813.
Author: Christoph Wagner Publisher: ISBN: Category : Languages : en Pages :
Book Description
This study takes a sample of 21 SMI stocks to test for the semi-strong form of the Efficient Market Hypothesis. For each stock semi-annually or quarterly released reports since the date of its listing in the SMI are used to compare published Earnings per Share values with investors' expectations. Based on a quantified measure for investors' surprise it is tested whether cumulative abnormal returns can be realized around earnings announcements. Although this study finds evidence for the existence of positive cumulative abnormal returns in pre-announcement periods as well as in periods of one to ten days after announcements both for positive and negative surprises, the results do not question the semi-strong form of the Efficient Market Hypothesis. All observations are grouped for quantiles according to their absolute values of earnings surprises. For each of the quantiles a portfolio is formed which takes a long position in observations with positive surprises and a short position in those with negative ones. It is tested whether the cumulative abnormal returns time series for the portfolios display a Post Earnings Announcement Drift and whether this drift depends on the level of surprise. However this study does not find any reliable evidence for the existence of such a drift on Swiss Stock Markets. The analytical framework of this study is critically assessed to show how variations in the setting can yield future research results which are more reconcilable with other studies.
Author: David A. Hirshleifer Publisher: ISBN: Category : Languages : en Pages : 54
Book Description
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.
Author: Benjamin C. Ayers Publisher: ISBN: Category : Languages : en Pages : 46
Book Description
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.
Author: Erdem Ucar Publisher: ISBN: Category : Languages : en Pages :
Book Description
I find stronger post-earnings announcement drift and delayed response ratio, and weaker immediate volume reaction, when the earnings announcing firm's local investors' sports mood is inconsistent with the earnings news' content (good vs. bad). This effect strengthens with firm's proximity to the location of the mood source. In my secon essay titled "Post-Earnings Announcement and Religious Holidays", I show the role of culture, proxied by religion, in financial information processing and the impact of culture on financial outcomes through investor inattention. I examine whether and how the religious holiday calendar affects investors' information processing by investigating price reactions to U.S. firms' earnings announcements that occur during Easter week. I find different patterns for short-term and delayed responses to Easter week earnings surprises. Moreover, there is a stronger immediate (delayed) reaction to good (bad) news, primarily found in less religious, predominantly Protestant areas. The results are consistent with a religion-induced investor distraction effect. The findings also show the role of religious characteristics in firms' information environment and the locality of stock prices.
Author: Joel Peress Publisher: ISBN: Category : Languages : en Pages : 51
Book Description
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.
Author: Sarah Suter
Author: Sarah Suter
Author: 
Author: Stefano Della Vigna
Author: Stefano Della Vigna
Author: David A. Hirshleifer
Author: Christoph Wagner
Author: David A. Hirshleifer
Author: Benjamin C. Ayers
Author: Erdem Ucar
Author: Joel Peress