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Post-Earnings Announcement Drift and the Impact of Loss Averse Investors

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dc.contributor.advisor Owens, David M.
dc.contributor.author Cummings, John
dc.date.accessioned 2014-06-23T18:42:17Z
dc.date.available 2014-06-23T18:42:17Z
dc.date.issued 2014
dc.identifier.uri http://hdl.handle.net/10066/14179
dc.description.abstract Despite being a highly documented phenomenon, the underlying cause of the post-earnings announcement drift is presently unknown. This study tests whether the tendency for investors to hold losses and realize gains--known as the disposition effect--can partially explain the existence of the post-earnings announcement drift anomaly in equity markets. The data for this paper consists of over six thousand companies from 1992 to 2012 for a total of over 140,000 quarterly earnings announcements. This study finds that the post-earnings announcement drift was most severe before 1998. During this period (1992-1998), a trading strategy that purchased (sold) stocks in the highest (lowest) decile of earnings surprises would have earned an annualized abnormal return of 32% (versus 4% for the later period). Furthermore, results show that the post-earnings announcement drift does not occur when the disposition effect is weakest, implying that the disposition effect plays an important role in the drift.
dc.description.sponsorship Haverford College. Department of Economics
dc.description.sponsorship Bryn Mawr College. Department of Mathematics
dc.language.iso eng
dc.rights.uri http://creativecommons.org/licenses/by-nc/3.0/us/
dc.subject.lcsh Rate of return -- Forecasting -- Mathematical models
dc.subject.lcsh Investment analysis -- Mathematical models
dc.title Post-Earnings Announcement Drift and the Impact of Loss Averse Investors
dc.type Thesis
dc.rights.access Dark Archive


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