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University of Otago

1. Gillan, Dean Richard. Post earnings-announcement drift: Can existing theories explain this anomoly? .

Degree: 2012, University of Otago

This study examines whether combining previously identified explanations of post earnings-announcement drift (PEAD) may lead to a new and more insightful explanation of the drift when compared with each explanation on its own. Tests are carried out over the period from quarter one 1991 to quarter one 2011 on the 500 firms comprising the S&P 500 as at the 14th September 2011. The roles of several control variables are investigated in predicting differential drift levels where cumulative abnormal returns from days 1 to 30 relative to the announcement is the measure of the PEAD effect. The results show that the PEAD occurs mostly because of transactions costs (Bhushan, 1994), arbitrage risk (Mendenhall, 2004) and investor distraction (Hirshleifer, Lim and Teoh, 2009). In new research, further tests examine the effect of the business cycle and the type of earnings surprise (positive/negative) on PEAD. It is found that investor distraction is only significant in explaining PEAD during expansions, while transactions costs and arbitrage risk are significant regardless of the stage of the business cycle. These results support a new explanation of PEAD that combines two of the existing explanations and suggests that the cause of PEAD varies and changes over the business cycle. The results of this study are consistent with Mendenhall (2004) with the addition of investor distraction which was not included in Mendenhall (2004). None of the tests in this study find a complete explanation of PEAD, so further research could be undertaken to suggest new explanations for the cause of the drift in addition to those examined in this study. Advisors/Committee Members: Roberts, Helen Mary (advisor).

Subjects/Keywords: Post earnings-announcement drift; earnings-announcement; earnings; PEAD; earnings drift; transaction costs; arbitrage risk; investor distraction

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APA (6th Edition):

Gillan, D. R. (2012). Post earnings-announcement drift: Can existing theories explain this anomoly? . (Masters Thesis). University of Otago. Retrieved from http://hdl.handle.net/10523/2532

Chicago Manual of Style (16th Edition):

Gillan, Dean Richard. “Post earnings-announcement drift: Can existing theories explain this anomoly? .” 2012. Masters Thesis, University of Otago. Accessed December 05, 2019. http://hdl.handle.net/10523/2532.

MLA Handbook (7th Edition):

Gillan, Dean Richard. “Post earnings-announcement drift: Can existing theories explain this anomoly? .” 2012. Web. 05 Dec 2019.

Vancouver:

Gillan DR. Post earnings-announcement drift: Can existing theories explain this anomoly? . [Internet] [Masters thesis]. University of Otago; 2012. [cited 2019 Dec 05]. Available from: http://hdl.handle.net/10523/2532.

Council of Science Editors:

Gillan DR. Post earnings-announcement drift: Can existing theories explain this anomoly? . [Masters Thesis]. University of Otago; 2012. Available from: http://hdl.handle.net/10523/2532


Uppsala University

2. Guscott, Alyssa. Investor distraction during the Swedish summer and stock market under-reaction to companies’ earnings releases.

Degree: Business Studies, 2011, Uppsala University

This paper investigates whether greater investor distraction on the Swedish stock market during the summer months of June, July and August leads to a more pronounced post earnings announcement drift (PEAD) effect, during the ten year period between 2000 and 2009. PEAD is an anomaly whereby the information contained in earnings announcements is not immediately or completely incorporated into stock prices, in the cases where the announcement contains an ‘earnings surprise’. The methodology involves using the standardised unexpected earnings (SUE) metric to measure the level of ‘earnings surprise’ and a buy and hold abnormal returns (BHAR) trading strategy to measure return. The study tests and confirms the existence of greater investor distraction during summer months on the Swedish market. For a holding period of 12 months, a BHAR trading strategy generates a greater abnormal return for summer months (11.3%) compared with the abnormal return for non-summer months (10.5%). These results are also interesting in a broader context, as they confirm the existence of the PEAD effect, one of the strongest counter-arguments to the efficient markets hypothesis (EMH); the foundation of many financial models used for stock market valuation. This is because, according to the EMH, in an efficient market it should not be possible to generate abnormal returns based on available information. However, it may be noted that these results do not take into account transaction costs. This means that while it can be demonstrated that there is greater investor distraction during the Swedish summer, in order to implement a successful trading strategy based on this finding, further testing would be required. Therefore, based on the findings of this paper, a number of areas for future research have been identified.

Subjects/Keywords: investor distraction; investor inattention; Post Earnings Announcement Drift; PEAD; under-reaction; earnings surprise; SUE; summer; seasonal effects; buy and hold abnormal returns; abnormal returns; BHAR; Business studies; Företagsekonomi

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APA · Chicago · MLA · Vancouver · CSE | Export to Zotero / EndNote / Reference Manager

APA (6th Edition):

Guscott, A. (2011). Investor distraction during the Swedish summer and stock market under-reaction to companies’ earnings releases. (Thesis). Uppsala University. Retrieved from http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-155747

Note: this citation may be lacking information needed for this citation format:
Not specified: Masters Thesis or Doctoral Dissertation

Chicago Manual of Style (16th Edition):

Guscott, Alyssa. “Investor distraction during the Swedish summer and stock market under-reaction to companies’ earnings releases.” 2011. Thesis, Uppsala University. Accessed December 05, 2019. http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-155747.

Note: this citation may be lacking information needed for this citation format:
Not specified: Masters Thesis or Doctoral Dissertation

MLA Handbook (7th Edition):

Guscott, Alyssa. “Investor distraction during the Swedish summer and stock market under-reaction to companies’ earnings releases.” 2011. Web. 05 Dec 2019.

Vancouver:

Guscott A. Investor distraction during the Swedish summer and stock market under-reaction to companies’ earnings releases. [Internet] [Thesis]. Uppsala University; 2011. [cited 2019 Dec 05]. Available from: http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-155747.

Note: this citation may be lacking information needed for this citation format:
Not specified: Masters Thesis or Doctoral Dissertation

Council of Science Editors:

Guscott A. Investor distraction during the Swedish summer and stock market under-reaction to companies’ earnings releases. [Thesis]. Uppsala University; 2011. Available from: http://urn.kb.se/resolve?urn=urn:nbn:se:uu:diva-155747

Note: this citation may be lacking information needed for this citation format:
Not specified: Masters Thesis or Doctoral Dissertation

.