Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades
51 Pages Posted: 23 Nov 2003 Last revised: 9 Aug 2018
There are 2 versions of this paper
Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades
Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades
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: Suggested Citation
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