Why Does the Post Earnings Announcement Drift Last for So Long? An Explanation Based on the Investors' Beliefs PDF Download

Author: Xin Cui
Publisher:
ISBN:
Category :
Languages : en
Pages : 65

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Book Description
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.

Author: Sarah Suter
Publisher:
ISBN:
Category :
Languages : en
Pages :

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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: Tomas Tomcany
Publisher: LAP Lambert Academic Publishing
ISBN: 9783843367813
Category :
Languages : en
Pages : 92

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Book Description
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.

Author: Benjamin C. Ayers
Publisher:
ISBN:
Category :
Languages : en
Pages : 46

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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: Thomas J. George
Publisher:
ISBN:
Category :
Languages : en
Pages : 68

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Book Description
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.

Author: Lihong Liang
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Book Description
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.

Author: George M. Frankfurter
Publisher: Routledge
ISBN: 1351744542
Category : Business & Economics
Languages : en
Pages : 825

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Book Description
This title was first published in 2002: From Individualism to the Individual treats finance as a social and cultural process, exploring the unseen side of academic discourse and the many obstacles the deeply entrenched elite puts in the way of alternative thinking. Opening with a detailed discussion of the role of ideology in the perpetuation of the limited methodological bias of the profession toward markets, the book then examines the more specific effects of such ideological limitations on theoretical and empirical research in finance. The authors develop alternative ways to examine finance both as a profession and as a field of inquiry. This book will be of particular value to researchers and practitioners working in finance, as well as those in other social science disciplines whose research relates to finance, culture and society.

Author: H. Kent Baker
Publisher: Oxford University Press, USA
ISBN: 0199829691
Category : Business & Economics
Languages : en
Pages : 802

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Book Description
Portfolio Theory and Management examines the foundations of portfolio management with the contributions of financial pioneers up to the latest trends. The book discusses portfolio theory and management both before and after the 2007-2008 financial crisis. It takes a global focus by highlighting cross-country differences and practices.

Author: Witold Pedrycz
Publisher: Springer
ISBN: 3319303198
Category : Technology & Engineering
Languages : en
Pages : 457

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Book Description
This edited volume provides the reader with a fully updated, in-depth treatise on the emerging principles, conceptual underpinnings, algorithms and practice of Computational Intelligence in the realization of concepts and implementation of models of sentiment analysis and ontology –oriented engineering. The volume involves studies devoted to key issues of sentiment analysis, sentiment models, and ontology engineering. The book is structured into three main parts. The first part offers a comprehensive and prudently structured exposure to the fundamentals of sentiment analysis and natural language processing. The second part consists of studies devoted to the concepts, methodologies, and algorithmic developments elaborating on fuzzy linguistic aggregation to emotion analysis, carrying out interpretability of computational sentiment models, emotion classification, sentiment-oriented information retrieval, a methodology of adaptive dynamics in knowledge acquisition. The third part includes a plethora of applications showing how sentiment analysis and ontologies becomes successfully applied to investment strategies, customer experience management, disaster relief, monitoring in social media, customer review rating prediction, and ontology learning. This book is aimed at a broad audience of researchers and practitioners. Readers involved in intelligent systems, data analysis, Internet engineering, Computational Intelligence, and knowledge-based systems will benefit from the exposure to the subject matter. The book may also serve as a highly useful reference material for graduate students and senior undergraduate students.

Author: G. Constantinides
Publisher: Elsevier
ISBN: 0080495087
Category : Business & Economics
Languages : en
Pages : 698

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Book Description
Volume 1B covers the economics of financial markets: the saving and investment decisions; the valuation of equities, derivatives, and fixed income securities; and market microstructure.