Abstract

http://ssrn.com/abstract=1122463
 
 

References (33)



 
 

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The High-Volume Return Premium and Post-Earnings Announcement Drift


Alina Lerman


Yale School of Management

Joshua Livnat


New York University

Richard R. Mendenhall


University of Notre Dame - Department of Finance

April 2008


Abstract:     
This paper investigates the relationship among trading volume around earnings announcements, earnings forecast errors, and subsequent returns. Prior research finds a positive relation between earnings announcement period trading volume and subsequent returns (the high-volume return premium) and between earnings forecast errors and subsequent returns (post-earnings announcement drift). We find that for a sample of firms followed by analysts these effects are complementary, i.e., each retains incremental ability to predict post-earnings announcement returns. Prior research provides two competing explanations for the high-volume return premium: changes in firm visibility versus differences in risk. We provide evidence that seems to rule out risk-based explanations while supporting the visibility hypothesis.

Number of Pages in PDF File: 43

Keywords: Market efficiency, Trading volume, High-volume return premium, Post-earnings announcement drift

JEL Classification: G14, G29, M41

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Date posted: April 18, 2008  

Suggested Citation

Lerman, Alina and Livnat, Joshua and Mendenhall, Richard R., The High-Volume Return Premium and Post-Earnings Announcement Drift (April 2008). Available at SSRN: http://ssrn.com/abstract=1122463 or http://dx.doi.org/10.2139/ssrn.1122463

Contact Information

Alina Lerman (Contact Author)
Yale School of Management ( email )
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States
Joshua Livnat
New York University ( email )
44 West 4th Street, Suite 10-76
Stern School of Business
New York, NY 10012-1118
United States
212-998-0022 (Phone)
212-995-4004 (Fax)
Richard R. Mendenhall
University of Notre Dame - Department of Finance ( email )
330 Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6076 (Phone)
574-631-5255 (Fax)
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