The Association Between Stock Splits And Post Earnings Announcement Drift PDF Download
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| Author | : Anthony J. Amoruso |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 1999 |
| Genre | : |
| ISBN | : |
Download The Association between Stock Splits and Post-Earnings Announcement Drift Book in PDF, ePub and Kindle
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.
| Author | : Michael M. Grayson |
| Publisher | : |
| Total Pages | : 73 |
| Release | : 2009 |
| 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 determine the components of the drift, the results of a field study to explain why the drift occurs, and tests of hypotheses to confirm the results of the economic modeling and field study. 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 | : Valentin Dimitrov |
| Publisher | : |
| Total Pages | : 55 |
| Release | : 2012 |
| Genre | : |
| ISBN | : |
Download Sell on the News Book in PDF, ePub and Kindle
Miller (1977) hypothesizes that differences of opinion among investors about stock value result in overvaluation so long as some investors are short-sales constrained. Prior evidence on the role of differences of opinion for stock prices has not yielded convincing evidence. We test the Miller hypothesis by focusing on earnings announcements because such announcements generally reduce differences of opinion among investors and, hence, are also likely to reduce overvaluation if the Miller hypothesis is true. We provide statistically significant and economically meaningful evidence in support of the Miller hypothesis. We find that the three-day hedge returns (returns on low minus high differences of opinion stocks) around earnings announcements are 0.2749% (23% annualized) to 0.7132% (60% annualized), depending upon the proxy for differences of opinion. The results are robust to alternative explanations such as the effects of financial leverage, post-earnings-announcement-drift and earnings announcement premium. Additional analysis using institutional ownership as a proxy for short-sales constraints further strengthens our conclusions regarding the Miller hypothesis. We find that the association between differences of opinion and announcement period returns is magnified within the subsample of stocks that are most difficult for investors to sell short.
| 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 | : Graeme Rankine |
| Publisher | : |
| Total Pages | : |
| Release | : 2000 |
| Genre | : |
| ISBN | : |
Download Stock Splits and Large Stock Dividends Book in PDF, ePub and Kindle
Prior research has used inaccurate classification rules to distinguish between stock splits and stock dividends. For a sample of two-for-one stock distributions, we show that firms that accounted for the distribution as a stock dividend generated five-day abnormal returns of 2.70%, compared to 0.93% for the stock split firms. Announcement returns are positively related to earnings growth in the two years following the distribution for stock dividend firms but not for stock split firms. The accounting choice appears to be used to confirm management's private information about future earnings revealed at the time of the distribution announcement.
| Author | : Paul M. Healy |
| Publisher | : Forgotten Books |
| Total Pages | : 36 |
| Release | : 2017-11-21 |
| Genre | : Business & Economics |
| ISBN | : 9780331631852 |
Download Earnings and Stock Splits (Classic Reprint) Book in PDF, ePub and Kindle
Excerpt from Earnings and Stock Splits The objective of this paper is to examine whether stock splits convey information about firms' earnings in the period surrounding the split announcements. In order to mitigate any confounding effects of simultaneous dividend changes, only firms that do not pay cash dividends at the time of the stock split are included in the sample. Our tests, based on a sample of 121 stock split announcements from the period 1970-1980, lead to several conclusions. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
| 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 | : Maria Chiara Iannino |
| Publisher | : |
| Total Pages | : 32 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Analysts' Forecast Dispersion and Stock Split Announcements Book in PDF, ePub and Kindle
This paper is an empirical investigation of the relation between the dispersion on analysts' earnings forecasts and the future performance following a change in the nominal price of shares. On a sample of US splits occurred from 1993 to 2013, we observe a change in the distribution of analysts' forecasts after the announcement of the event. In particular, we observe an increase in forecasts' dispersion. We distinguish the two components of private and common information, and we find that asymmetric information significantly increases after the announcement of stock splits, while no change is evinced in uncertainty. While we do not observe any relationship between dispersion and future returns in our sample of stocks, we shed light on the literature on disagreement observing a negative relation between asymmetric information and both future returns and cumulative abnormal returns post-split. We conclude observing that stock splits have a stronger positive effect on future performance for shares with lower prior asymmetric information.
| Author | : Kirsten L. Anderson |
| Publisher | : |
| Total Pages | : 47 |
| Release | : 2007 |
| Genre | : |
| ISBN | : |
Download Opinion Divergence and Post-Earnings Announcement Drift Book in PDF, ePub and Kindle
This paper examines the relationship between divergent opinions and post-earnings announcement drift. We provide an improved measure of opinion divergence constructed from the dispersion of order flow across Nasdaq market makers that captures the breadth of divergence that is lost by volume-based measures. We find evidence that both limited participation (in the form of delayed price reaction and short sale constraints) and divergent opinions contribute significantly to drift. We also find that earnings surprises induce permanent upward shifts in opinion divergence, trading volume, and return volatility that last up to nine months following the announcement. Our results suggest that opinion divergence elicits added risk in the form of increased volatility with the resulting returns comprising a component of drift. We document that daily opinion divergence is a priced risk factor over the nine month drift period. The persistence of these relationships suggests that opinion divergence represents a fundamental change in the market's assessment of the announcing firm that extends beyond the announcement period and influences post-announcement stock returns.
| 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.
