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Author | : Zhipeng Yan |
Publisher | : |
Total Pages | : 36 |
Release | : 2015 |
Genre | : |
ISBN | : |
Download Earnings Response Elasticity and Post-Earnings-Announcement Drift Book in PDF, ePub and Kindle
This article studies the relationship between initial market response to earnings surprise and subsequent stock price movement.We first develop a new measure - the earnings response elasticity (ERE) - to capture initial market response. It is defined as the absolute value of earnings announcement abnormal returns (EAARs) divided by the earnings surprise. The ERE is then examined under various categories contingent on the signs of earnings surprises (+/-/0) and EAARs (+/-). We find that a weaker initial market reaction to earnings surprises, or lower ERE, leads to a larger post-announcement drift.A trading strategy of taking a long position in stocks in the lowest ERE quintile when both earnings surprises and EAARs are positive and a short position when both are negative can generate an average abnormal return of 5.11 per cent per quarter.
Author | : Tomas Tomcany |
Publisher | : LAP Lambert Academic Publishing |
Total Pages | : 92 |
Release | : 2010-11 |
Genre | : |
ISBN | : 9783843367813 |
Download Post-Earnings Announcement Drift Book in PDF, ePub and Kindle
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 | : Jaewon Choi |
Publisher | : |
Total Pages | : 77 |
Release | : 2018 |
Genre | : |
ISBN | : |
Download Asymmetric Learning from Prices and Post-Earnings-Announcement Drift Book in PDF, ePub and Kindle
Motivated by research in psychology and experimental economics, we assume that investors update their beliefs about an asset's value upon observing the price, but only when the price clearly reveals that others obtained private information that differs from their own private information. Specifically, we assume that investors learn from the price of an asset in an asymmetric manner -- they learn from the price if they observe good (bad) private information and the price is worse (better) than what is justified based on public information alone. We show that asymmetric learning from an asset's price leads to post-earnings-announcement drift (PEAD), and that it generates arbitrage opportunities that are less attractive than alternative explanations of PEAD. In addition, our model predicts that PEAD will be concentrated in earnings surprises that are not dominated by accruals, and it also predicts that earnings response coefficients will decline in the magnitude of the earnings surprises.
Author | : VICTOR L. BERNARD |
Publisher | : |
Total Pages | : 44 |
Release | : 1992 |
Genre | : |
ISBN | : |
Download STOCK PRICE REACTIONS TO EARNINGS ANNOUNCEMENTS: A Book in PDF, ePub and Kindle
Author | : Nils Carlson |
Publisher | : |
Total Pages | : |
Release | : 2015 |
Genre | : Economics |
ISBN | : |
Download Analysis of Post-earnings Announcement Market Reactions Book in PDF, ePub and Kindle
The stock market, according to the efficient market hypothesis, is informationally efficient in that prices instantly reflect all available public information. Prior financial literature on the study of the relationship between earnings announcements and their effect on the stock market reveals that there is a significant "drift" of a firm's cumulative abnormal return that occurs in the direction of its earnings surprise. This phenomenon is in contrast to how the efficient market hypothesis would expect the market to react to this new information. The prior studies on this topic were conducted in the 1980s - before the existence of both high-speed access to news via cell phone alerts and the increasing ability to trade quickly on new information via online brokers. This study attempts to test this "post-earnings announcement drift" on the current market to see if this phenomenon is still relevant in today's market and to see if it can be exploited. This study finds that there is still a post-earnings announcement drift that persists for the twenty-one days following earnings announcements. The cumulative abnormal returns continue to drift upwards for "good news" firms and continue to drift downwards for "bad news" firms for twenty-one days and may continue in the same direction after this period. This study also finds that a trading strategy that involves forming long portfolios of firms that beat earnings by the greatest magnitude (most positive earnings surprise) and also have the largest abnormal return on the day of the announcement and forming a short portfolio of firms that miss estimates by the greatest magnitude (most negative earnings surprise) and have the most negative abnormal return on the day of the announcement had an average annualized return of 20.343% over the ten year period starting in 2004 while the S & P 500 had an average annualized return of 9.1% over the same period.
Author | : Josef Fink |
Publisher | : |
Total Pages | : |
Release | : 2020 |
Genre | : |
ISBN | : |
Download A Review of the Post-earnings-announcement Drift Book in PDF, ePub and Kindle
Author | : |
Publisher | : |
Total Pages | : 50 |
Release | : 1989 |
Genre | : |
ISBN | : |
Download Post Earnings Announcement Drift Book in PDF, ePub and Kindle
Author | : Michael M. Grayson |
Publisher | : |
Total Pages | : 61 |
Release | : 2005 |
Genre | : |
ISBN | : |
Download Explanations Book in PDF, ePub and Kindle
This study addresses the issue of post-earnings-announcement drift. According to the present theory of how capital markets behave, the drift cannot occur if either the capital asset pricing model (CAPM) or the efficient market hypothesis (EMH) is valid. The drift is a drift away from the CAPM price, which means that CAPM cannot be how the market mechanically determines prices. The drift has been known since at least 1968, which means that an allegedly efficient market knows of the drift, yet does not take the drift into account in setting prices and thereby drive the drift out of existence. The existence of the drift means that the market cannot be completely efficient even within a time frame of three months.This article uses economic modeling to analyze the drift and the results of a field study to explain why it occurs. This article also explains (1) why the size of the drift varies by size of the company, (2) that the market is not efficient, (3) why stock prices tend to rise after a stock split, and (4) some of the incentives for managements to smooth earnings.
Author | : Rong Ding |
Publisher | : |
Total Pages | : 40 |
Release | : 2020 |
Genre | : |
ISBN | : |
Download Social Media Coverage and Post-Earnings Announcement Drift Book in PDF, ePub and Kindle
In this study, we investigate how social media coverage mitigates the under-reaction to an earnings surprise captured by post-earnings announcement drift. Based on the analysis of data collected over a nine-year period (2006-2014) from Seeking Alpha, the largest crowdsourced social media platform providing third-party-generated financial commentary and analysis in the United States, we find that the market response to an earnings surprise attenuates for firms with high coverage on Seeking Alpha prior to the earnings announcement. Furthermore, such an effect is more salient for firms with lower institutional ownership and lower press coverage. The findings are consistent with the view that higher social media coverage facilitates a timely absorption of earnings-based information by stock prices, leading to a weaker under-reaction of the market.
Author | : Josef Fink |
Publisher | : |
Total Pages | : |
Release | : 2020 |
Genre | : |
ISBN | : |
Download Earnings Autocorrelation and the Post-earnings-announcement Drift Book in PDF, ePub and Kindle