Abstract

http://ssrn.com/abstract=1510321
 
 

References (56)



 
 

Citations (9)



 


 



Post Loss/Profit Announcement Drift


Karthik Balakrishnan


London Business School

Eli Bartov


New York University

Lucile Faurel


University of California, Irvine

November 20, 2009

Journal of Accounting & Economics (JAE), Vol. 50, No. 1, 2010

Abstract:     
We document a market failure to fully respond to loss/profit quarterly announcements. The annualized post portfolio formation return spread between two portfolios formed on extreme losses and extreme profits is approximately 21 percent. This loss/profit anomaly is incremental to previously documented accounting-related anomalies, and is robust to alternative risk adjustments, distress risk, firm size, short sales constraints, transaction costs, and sample periods. In an effort to explain this finding, we show that this mispricing is related to differences between conditional and unconditional probabilities of losses/profits, as if stock prices do not fully reflect conditional probabilities in a timely fashion.

Number of Pages in PDF File: 56

Keywords: Loss/profit mispricing, loss/profit predictability, accounting losses/profits, post earnings announcement drift, earnings-based anomalies

JEL Classification: M41, G14

Accepted Paper Series


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Date posted: November 21, 2009 ; Last revised: May 7, 2013

Suggested Citation

Balakrishnan, Karthik and Bartov, Eli and Faurel, Lucile, Post Loss/Profit Announcement Drift (November 20, 2009). Journal of Accounting & Economics (JAE), Vol. 50, No. 1, 2010. Available at SSRN: http://ssrn.com/abstract=1510321 or http://dx.doi.org/10.2139/ssrn.1510321

Contact Information

Karthik Balakrishnan
London Business School ( email )
Sussex Place
Regent's Park
London, NW1 4SA
United Kingdom
Eli Bartov (Contact Author)
New York University ( email )
40 W. 4th St., 423
New York, NY 10012
United States
212-995-4004 (Fax)
Lucile Faurel
University of California, Irvine ( email )
The Paul Merage School of Business
SB 442
Irvine, CA California 92697
United States
1-949-824-0020 (Phone)
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