IDEAS home Printed from https://ideas.repec.org/a/eme/ijmfpp/v7y2011i3p220-237.html
   My bibliography  Save this article

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, vol. 7(3), pages 220-237, June.
  • Handle: RePEc:eme:ijmfpp:v:7:y:2011:i:3:p:220-237
    as

    Download full text from publisher

    File URL: http://www.emeraldinsight.com/10.1108/17439131111144441?utm_campaign=RePEc&WT.mc_id=RePEc
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
    2. X. Frank Zhang, 2006. "Information Uncertainty and Stock Returns," Journal of Finance, American Finance Association, vol. 61(1), pages 105-137, February.
    3. Ikenberry, David & Lakonishok, Josef & Vermaelen, Theo, 1995. "Market underreaction to open market share repurchases," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 181-208.
    4. Desai, Hemang & Jain, Prem C, 1997. "Long-Run Common Stock Returns following Stock Splits and Reverse Splits," The Journal of Business, University of Chicago Press, vol. 70(3), pages 409-433, July.
    5. repec:bla:joares:v:37:y:1999:i:1:p:133-150 is not listed on IDEAS
    6. Tomas Dvorak, 2001. "Do Domestic Investors Have an Information Advantage? Evidence from Indonesia," Center for Development Economics 168, Department of Economics, Williams College.
    7. Noe, Christopher F., 1999. "Voluntary disclosures and insider transactions," Journal of Accounting and Economics, Elsevier, vol. 27(3), pages 305-326, July.
    8. Kaen, Fred R & Rosenman, Robert E, 1986. "Predictable Behavior in Financial Markets: Some Evidence in Support ofHeiner's Hypothesis," American Economic Review, American Economic Association, vol. 76(1), pages 212-220, March.
    9. Ke, Bin & Ramalingegowda, Santhosh, 2005. "Do institutional investors exploit the post-earnings announcement drift?," Journal of Accounting and Economics, Elsevier, vol. 39(1), pages 25-53, February.
    10. Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
    11. Zoran Ivkovic & Scott Weisbenner, 2005. "Local Does as Local Is: Information Content of the Geography of Individual Investors' Common Stock Investments," Journal of Finance, American Finance Association, vol. 60(1), pages 267-306, February.
    12. Heiner, Ronald A, 1983. "The Origin of Predictable Behavior," American Economic Review, American Economic Association, vol. 73(4), pages 560-595, September.
    13. David Hirshleifer & James N. Myers & Linda A. Myers & Siew Hong Teoh, 2004. "Do Individual Investors Drive Post-Earnings Announcement Drift? Direct Evidence from Personal Trades," Finance 0412003, EconWPA.
    14. Nagel, Stefan, 2005. "Short sales, institutional investors and the cross-section of stock returns," Journal of Financial Economics, Elsevier, vol. 78(2), pages 277-309, November.
    15. Markku Vieru & Jukka Perttunen & Hannu Schadewitz, 2006. "How Investors Trade Around Interim Earnings Announcements," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1-2), pages 145-178.
    16. Jennifer Francis & Ryan Lafond & Per Olsson & Katherine Schipper, 2007. "Information Uncertainty and Post-Earnings-Announcement-Drift," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(3-4), pages 403-433.
    17. Anders Ekholm, 2006. "How Do Different Types of Investors React to New Earnings Information?," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(1-2), pages 127-144.
    18. Ball, Ray, 1992. "The earnings-price anomaly," Journal of Accounting and Economics, Elsevier, vol. 15(2-3), pages 319-345, August.
    19. Bailey, Warren & Andrew Karolyi, G. & Salva, Carolina, 2006. "The economic consequences of increased disclosure: Evidence from international cross-listings," Journal of Financial Economics, Elsevier, vol. 81(1), pages 175-213, July.
    20. Kang, Jun-Koo & Stulz, Rene M., 1997. "Why is there a home bias? An analysis of foreign portfolio equity ownership in Japan," Journal of Financial Economics, Elsevier, vol. 46(1), pages 3-28, October.
    21. Chewning, Eugene Jr. & Coller, Maribeth & Tuttle, Brad, 2004. "Do market prices reveal the decision models of sophisticated investors?: Evidence from the laboratory," Accounting, Organizations and Society, Elsevier, vol. 29(8), pages 739-758, November.
    22. repec:bla:joares:v:6:y:1968:i:2:p:159-178 is not listed on IDEAS
    23. Padmaja Kadiyala, 2004. "Investor Reaction to Corporate Event Announcements: Underreaction or Overreaction?," The Journal of Business, University of Chicago Press, vol. 77(2), pages 357-386, April.
    24. Lee, Charles M. C., 1992. "Earnings news and small traders : An intraday analysis," Journal of Accounting and Economics, Elsevier, vol. 15(2-3), pages 265-302, August.
    25. Chan, Louis K C & Jegadeesh, Narasimhan & Lakonishok, Josef, 1996. " Momentum Strategies," Journal of Finance, American Finance Association, vol. 51(5), pages 1681-1713, December.
    Full references (including those not matched with items on IDEAS)

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:ijmfpp:v:7:y:2011:i:3:p:220-237. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: http://www.emeraldinsight.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.