IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v8y2003i2d10.1023_a1024429915810.html

Discussion of “Post-Earnings Announcement Drift and Market Participants' Information Processing Biases”

Author

Listed:
  • Jacob K. Thomas

    (Columbia Business School)

Abstract

Liang (2003, this issue) hypothesizes that the predictable stock price drifts that occur after earnings earning announcements increase with (a) divergence in analyst beliefs and (b) the reliability of publicly reported quarterly earnings. Whereas the prior literature has generally hypothesized that drifts are caused by the inability of the stock market to fully appreciate predictable autocorrelation in seasonally-differenced quarterly earnings, this paper relies on cognitive biases proposed in the behavioral finance literature. While the results are consistent with these predictions, my discussion raises possible reasons why it may be premature to conclude that the cognitive biases discussed here cause drifts.

Suggested Citation

  • Jacob K. Thomas, 2003. "Discussion of “Post-Earnings Announcement Drift and Market Participants' Information Processing Biases”," Review of Accounting Studies, Springer, vol. 8(2), pages 347-353, June.
    • Handle: RePEc:spr:reaccs:v:8:y:2003:i:2:d:10.1023_a:1024429915810
    DOI: 10.1023/A:1024429915810
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1023/A:1024429915810
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1023/A:1024429915810?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. David Burgstahler & James Jiambalvo & Terry Shevlin, 2002. "Do Stock Prices Fully Reflect the Implications of Special Items for Future Earnings?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 40(3), pages 585-612, June.
    2. 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.
    3. Bernard, Victor L. & Thomas, Jacob K., 1990. "Evidence that stock prices do not fully reflect the implications of current earnings for future earnings," Journal of Accounting and Economics, Elsevier, vol. 13(4), pages 305-340, December.
    4. Brown, LD & Han, JCY, 2000. "Do stock prices fully reflect the implications of current earnings for future earnings for AR1 firms?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 38(1), pages 149-164.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ganapathi Narayanamoorthy, 2006. "Conservatism and Cross‐Sectional Variation in the Post–Earnings Announcement Drift," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 44(4), pages 763-789, September.
    2. He, Shuoyuan & Narayanamoorthy, Ganapathi (Gans), 2020. "Earnings acceleration and stock returns," Journal of Accounting and Economics, Elsevier, vol. 69(1).
    3. Mei Luo & Shuai Shao & Frank Zhang, 2018. "Does financial reporting above or below operating income matter to firms and investors? The case of investment income in China," Review of Accounting Studies, Springer, vol. 23(4), pages 1754-1790, December.
    4. Jeffrey T. Doyle & Russell J. Lundholm & Mark T. Soliman, 2003. "The Predictive Value of Expenses Excluded from Pro Forma Earnings," Review of Accounting Studies, Springer, vol. 8(2), pages 145-174, June.
    5. repec:grz:wpsses:2020-04 is not listed on IDEAS
    6. Danny Lo, 2015. "Essays in Market Microstructure and Investor Trading," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 4-2015, January-A.
    7. Kothari, S. P., 2001. "Capital markets research in accounting," Journal of Accounting and Economics, Elsevier, vol. 31(1-3), pages 105-231, September.
    8. Baginski, Stephen P. & Demers, Elizabeth & Kausar, Asad & Yu, Yingri Julia, 2018. "Linguistic tone and the small trader," Accounting, Organizations and Society, Elsevier, vol. 68, pages 21-37.
    9. repec:ipg:wpaper:2014-076 is not listed on IDEAS
    10. Zhang, Sijia & Gregoriou, Andros & Wu, He, 2024. "Asymmetric post earnings announcement drift and order flow imbalance: The impact on stock market returns," International Review of Financial Analysis, Elsevier, vol. 94(C).
    11. Ray Ball & Lakshmanan Shivakumar, 2008. "How Much New Information Is There in Earnings?," Journal of Accounting Research, John Wiley & Sons, Ltd., vol. 46(5), pages 975-1016, December.
    12. Frank Heflin & Charles Hsu & Qinglu Jin, 2015. "Accounting conservatism and Street earnings," Review of Accounting Studies, Springer, vol. 20(2), pages 674-709, June.
    13. Wu, Chen-Hui, 2022. "The informativeness of brokerage reports: Privately-circulated versus publicly-disseminated news," International Review of Financial Analysis, Elsevier, vol. 83(C).
    14. Blankespoor, Elizabeth & deHaan, Ed & Marinovic, Iván, 2020. "Disclosure processing costs, investors’ information choice, and equity market outcomes: A review," Journal of Accounting and Economics, Elsevier, vol. 70(2).
    15. Gongmeng Chen & Michael Firth & Daniel Ning Gao, 2011. "The Information Content of Earnings Components: Evidence from the Chinese Stock Market," European Accounting Review, Taylor & Francis Journals, vol. 20(4), pages 669-692, May.
    16. Truong, Cameron, 2010. "Post earnings announcement drift and the roles of drift-enhanced factors in New Zealand," Pacific-Basin Finance Journal, Elsevier, vol. 18(2), pages 139-157, April.
    17. Eom, Yunsung & Hahn, Jaehoon & Sohn, Wook, 2019. "Individual investors and post-earnings-announcement drift: Evidence from Korea," Pacific-Basin Finance Journal, Elsevier, vol. 53(C), pages 379-398.
    18. Chung, Kee H. & Kim, Oliver & Lim, Steve C. & Yang, Sean, 2019. "An analytical measure of market underreaction to earnings news," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 612-624.
    19. Gu, Zhaoyang & Chen, Ting, 2004. "Analysts' treatment of nonrecurring items in street earnings," Journal of Accounting and Economics, Elsevier, vol. 38(1), pages 129-170, December.
    20. G. Geoffrey Booth & Juha-Pekka Kallunki & Teppo Martikainen, 1999. "Earnings news and the behaviour of large and small traders in the Finnish stock market," Applied Economics Letters, Taylor & Francis Journals, vol. 6(12), pages 771-774.
    21. Peng-Chia Chiu & Timothy D. Haight, 2020. "Investor learning, earnings signals, and stock returns," Review of Quantitative Finance and Accounting, Springer, vol. 54(2), pages 671-698, February.
    22. Pingui Rao & Heng Yue & Xin Zhou, 2018. "Return predictability and the real option value of segments," Review of Accounting Studies, Springer, vol. 23(1), pages 167-199, March.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    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:spr:reaccs:v:8:y:2003:i:2:d:10.1023_a:1024429915810. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.