Post-earnings announcement drift and market participants' information processing biases

Research output: Contribution to journalArticle

49 Scopus citations

Abstract

Prior research has been unable to explain the phenomenon known as post-earnings announcement drift, raising questions concerning the semi-strong form efficiency of the market typically assumed in capital market research. This study contributes to our understanding of this anomaly by examining drift in the context of theories that consider investors' non-Bayesian behaviors. The empirical evidence reveals that investors' overconfidence about their private information and the reliability of the earnings information are two important factors that explain drift. Finally, this study also provides insight into the puzzling relationship between dispersion and drift discussed in prior research.

Original languageEnglish (US)
Pages (from-to)321-345
Number of pages25
JournalReview of Accounting Studies
Volume8
Issue number2-3
StatePublished - Jun 1 2003
Externally publishedYes

Keywords

  • Forecast dispersion
  • Market efficiency
  • Non-Bayesian behavior
  • Overconfidence
  • Post-earnings announcement drift
  • Uncertainty

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting(all)

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