Essays on Earnings Persistence, Earnings Trends, and the Predictability of Post-earnings-announcement Stock Returns PDF Download
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Author: Changling Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 140
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Book Description
Author: Changling Chen
Publisher:
ISBN:
Category :
Languages : en
Pages : 140
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Book Description
Author: Sana Mohsni
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ISBN:
Category :
Languages : en
Pages :
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Author: Dennis Y. Chung
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Category :
Languages : en
Pages :
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We examine whether the post-earnings announcement drift (PEAD) varies cross-sectionally with short-horizon return predictability from order flows, which characterizes the information environment and reflects the extent to which information is efficiently impounded in prices. We first demonstrate that this proxy for market efficiency (developed by Chordia, Roll, and Subrahmanyam 2008) captures the degree of market frictions that limit arbitrage activities. We then present evidence that the inverse of short-horizon return predictability is negatively associated with the PEAD and remains statistically and economically significant after controlling for a wide range of explanatory variables used in prior research. Finally, although we find that profits of implementing the PEAD trading strategy are significantly reduced by transaction costs, we demonstrate that profits continue to remain statistically and economically significant for the less efficient firms that face otherwise higher barriers to arbitrage. Our results indicate that short-horizon return predictability from order flows better explains stock returns after earnings announcements.
Author: Joshua Livnat
Publisher:
ISBN:
Category :
Languages : en
Pages : 39
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Book Description
This study explores an additional factor that is associated with differential levels of the post-earnings-announcement drift (henceforth drift) - the contemporaneous surprise in revenues. Consistent with prior evidence about greater persistence of revenues and greater noise caused by heterogeneity of expenses, this study shows that the earnings drift is stronger when the revenue surprise is in the same direction as the earnings surprise. Moreover, the study provides direct evidence that the drift is stronger when the earnings persistence is greater. The results are robust to various controls, including the proportions of stock held by institutional investors, trading liquidity, and arbitrage risk.
Author: VICTOR L. BERNARD
Publisher:
ISBN:
Category :
Languages : en
Pages : 44
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Author: Qi Sun
Publisher:
ISBN:
Category : Finance, Public
Languages : en
Pages : 204
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Author:
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ISBN:
Category : Dissertations, Academic
Languages : en
Pages : 596
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Author: Jeffrey T. Doyle
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Category :
Languages : en
Pages :
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We investigate the stock returns subsequent to quarterly earnings surprises, where the benchmark for an earnings surprise is the consensus analyst forecast. By defining the surprise relative to an analyst forecast rather than a time-series model of expected earnings, we document returns subsequent to earnings announcements that are much larger, persist for much longer, and are more heavily concentrated in the long portion of the hedge portfolio than shown in previous studies. We show that our results hold after controlling for risk and previously documented anomalies, and are positive for every quarter between 1988 and 2000. Finally, we explore the financial results and information environment of firms with extreme earnings surprises and find that they tend to be 'neglected' stocks with relatively high book-to-market ratios, low analyst coverage, and high analyst forecast dispersion. In the three subsequent years, firms with extreme positive earnings surprises tend to have persistent earnings surprises in the same direction, strong growth in cash flows and earnings, and large increases in analyst coverage, relative to firms with extreme negative earnings surprises. We also show that the returns to the earnings surprise strategy are highest in the quartile of firms where transaction costs are highest and institutional investor interest is lowest, consistent with the idea that market inefficiencies are more prevalent when frictions make it difficult for large, sophisticated investors to exploit the inefficiencies.
Author: Shuoyuan He
Publisher:
ISBN:
Category :
Languages : en
Pages : 52
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We document that earnings acceleration, defined as the quarter-over-quarter change in earnings growth, has significant explanatory power for future excess returns. These excess returns are robust to a wide range of previously documented anomalies as well as a battery of risk controls. The magnitude of the excess returns (1.8% in a month-long window) is comparable to those from book-to-market, post-earnings announcement drift and gross profitability anomalies. The future return predictability appears to be consistent with investors assuming a seasonal random walk model for quarterly earnings and missing predictable implications of earnings acceleration for earnings growth two and three quarters hence. Finally, the excess returns from the basic earnings acceleration trading strategy can be enhanced further by nearly 45% by focusing on specific patterns of earnings acceleration.
Author: Li Yao
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Book Description
Using a sample of firms that have consecutive earnings growth for more than 20 quarters (earnings strings), I assess the relationship between earnings persistence and the extent to which investors are able to anticipate breaks of earnings strings. I find that firm-specific earnings persistence exhibits a concave trend during earnings strings. Stock returns are significantly and positively associated with earnings persistence. Upon breaks of earnings strings, investors' reactions are more negative for firms having higher earnings persistence -- especially those with smaller institutional holdings and analyst coverage, and those with insider selling activities -- before the break. Additional analyses show that variations in firms' economic performance (fundamentals) explain the varying earnings persistence during earnings strings.
