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Market uncertainty, market sentiment, and the post-earnings announcement drift

Author

Listed:
  • Ron Bird

    ()

  • Daniel Choi

    ()

  • Danny Yeung

    ()

Abstract

Post-earnings announcement drift (PEAD) which was first identified over 40 years ago seems to be as much alive today as it ever was. Numerous attempts have been made to explain its continued existence. In this paper we provide evidence to support a new explanation: that the PEAD is a reflection of the level of market uncertainty and sentiment that prevails during the post-announcement period. The overriding conclusion from our analysis is that both uncertainty and sentiment play a central role in determining investor behaviour and it is this behaviour that ultimately determines the pricing that is observed in financial markets. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Ron Bird & Daniel Choi & Danny Yeung, 2014. "Market uncertainty, market sentiment, and the post-earnings announcement drift," Review of Quantitative Finance and Accounting, Springer, vol. 43(1), pages 45-73, July.
  • Handle: RePEc:kap:rqfnac:v:43:y:2014:i:1:p:45-73
    DOI: 10.1007/s11156-013-0364-x
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    References listed on IDEAS

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    Cited by:

    1. repec:kap:rqfnac:v:51:y:2018:i:1:d:10.1007_s11156-017-0669-2 is not listed on IDEAS
    2. Nicole Thorne Jenkins & Michael D. Kimbrough & Juan Wang, 2016. "The extent of informational efficiency in the credit default swap market: evidence from post-earnings announcement returns," Review of Quantitative Finance and Accounting, Springer, vol. 46(4), pages 725-761, May.
    3. repec:wsi:rpbfmp:v:18:y:2015:i:03:n:s0219091515500198 is not listed on IDEAS
    4. Qi Zhang & Charlie Cai & Kevin Keasey, 2014. "The profitability, costs and systematic risk of the post-earnings-announcement-drift trading strategy," Review of Quantitative Finance and Accounting, Springer, vol. 43(3), pages 605-625, October.
    5. Ron Bird & Krishna Reddy & Danny Yeung, 2014. "The relationship between uncertainty and the market reaction to information: Is it influenced by stock-specific characteristics?," International Journal of Behavioural Accounting and Finance, Inderscience Enterprises Ltd, vol. 4(2), pages 113-132.
    6. repec:kap:rqfnac:v:50:y:2018:i:1:d:10.1007_s11156-017-0628-y is not listed on IDEAS
    7. Ray R. Sturm, 2016. "Is There a Presidential Election Cycle in Firm Financials?," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 19(02), pages 1-18, June.
    8. repec:wsi:rpbfmp:v:17:y:2014:i:03:n:s0219091514500179 is not listed on IDEAS
    9. Corbet, Shaen & Dowling, Michael & Cummins, Mark, 2015. "Analyst recommendations and volatility in a rising, falling, and crisis equity market," Finance Research Letters, Elsevier, vol. 15(C), pages 187-194.
    10. repec:wsi:rpbfmp:v:17:y:2014:i:03:n:s0219091514500192 is not listed on IDEAS

    More about this item

    Keywords

    Anomalies; Post-earrings announcement drift; Uncertainty; Sentiment; G12; G14; D81;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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