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Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades


David A. Hirshleifer


University of California, Irvine - Paul Merage School of Business

James N. Myers


University of Arkansas

Linda A. Myers


University of Arkansas

Siew Hong Teoh


University of California - Paul Merage School of Business
March 2008


Abstract:     
This study tests whether naïve trading by individual investors, or some class of individual investors, causes post-earnings announcement drift (PEAD). Inconsistent with the individual trading hypothesis, individual investor trading fails to subsume any of the power of extreme earnings surprises to predict future abnormal returns. Moreover, individuals are significant net buyers after both negative and positive extreme earnings surprises, consistent with an attention effect, but not with their trades causing PEAD. Finally, we find no indication that trading by individuals explains the concentration of drift at subsequent earnings announcement dates.

Number of Pages in PDF File: 51

Keywords: earnings anomalies, post-earnings announcement drift, market efficiency, trading activity, individual investors, investor sophistication

JEL Classification: G14, M41

working papers series


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Date posted: November 23, 2003 ; Last revised: April 17, 2008

Suggested Citation

Hirshleifer, David A., Myers, James N., Myers, Linda A. and Teoh, Siew Hong, Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades (March 2008). Available at SSRN: http://ssrn.com/abstract=1120495 or http://dx.doi.org/10.2139/ssrn.299260

Contact Information

David A. Hirshleifer (Contact Author)
University of California, Irvine - Paul Merage School of Business ( email )
Irvine, CA California 92697-3125
United States
James N. Myers
University of Arkansas ( email )
Business Bldg. 454
Fayetteville, AR 72701
United States
Linda A. Myers
University of Arkansas ( email )
Fayetteville, AR 72701
United States
Siew Hong Teoh
University of California - Paul Merage School of Business ( email )
Irvine, CA California 92697-3125
United States
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