Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades

51 Pages Posted: 23 Nov 2003 Last revised: 9 Aug 2018

See all articles by David A. Hirshleifer

David A. Hirshleifer

Marshall School of Business, USC; National Bureau of Economic Research (NBER)

James N. Myers

University of Tennessee, Knoxville - College of Business Administration

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management

Siew Hong Teoh

UCLA Anderson School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2008

Abstract

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. Presentation slides available at https://ssrn.com/abstract=3228813

Keywords: earnings anomalies, post-earnings announcement drift, market efficiency, trading activity, individual investors, investor sophistication

JEL Classification: G14, M41

Suggested Citation

Hirshleifer, David A. and Myers, James N. and Myers, Linda A. and Teoh, Siew Hong, Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades (March 1, 2008). Available at SSRN: https://ssrn.com/abstract=1120495 or http://dx.doi.org/10.2139/ssrn.299260

David A. Hirshleifer (Contact Author)

Marshall School of Business, USC ( email )

Marshall School of Business
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.uci.edu/dhirshle/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James N. Myers

University of Tennessee, Knoxville - College of Business Administration ( email )

Haslam Business Building
Knoxville, TN
United States

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management ( email )

Knoxville, TN
United States

Siew Hong Teoh

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/faculty-and-research/accounting/faculty/teoh

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