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Foreign vs domestic investors and the post‐announcement drift

Author

Listed:
  • G. Geoffrey Booth
  • Juha‐Pekka Kallunki
  • Petri Sahlström
  • Jaakko Tyynelä

Abstract

Purpose - This paper aims to investigate who causes post‐announcement drift and whether this drift is observed for various types of news announcements. Design/methodology/approach - Using Finnish share ownership data, the authors examine the trading behavior of foreign and domestic investors during the post‐announcement periods of scheduled earnings and unscheduled non‐earnings announcements. Findings - The results show that the post‐announcement drift exists for both types of news, but only if the news is negative. As a group, foreign investors react first by selling shares of firms reporting negative information. Domestic investors act in the opposite manner. Originality/value - The results imply that the post‐announcement drift is a special case of a more general post‐disclosure phenomenon and that investor differences (most likely information processing skills) is one likely explanation for its pervasiveness.

Suggested Citation

  • G. Geoffrey Booth & Juha‐Pekka Kallunki & Petri Sahlström & Jaakko Tyynelä, 2011. "Foreign vs domestic investors and the post‐announcement drift," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 7(3), pages 220-237, June.
    • Handle: RePEc:eme:ijmfpp:v:7:y:2011:i:3:p:220-237
    DOI: 10.1108/17439131111144441
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    1. Mao, Ruiqi & Segara, Reuben & Westerholm, Joakim, 2019. "Analyst tipping: Evidence on Finnish stocks," International Review of Financial Analysis, Elsevier, vol. 66(C).

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