Information Uncertainty and the Post-Earnings-Announcement Drift Anomaly: Insights from REITs
S. McKay Price
Lehigh University - Perella Department of Finance
Dean H. Gatzlaff
Florida State University
C. F. Sirmans
Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law
January 25, 2012
Journal of Real Estate Finance and Economics, Vol. 44, Nos. 1/2, 2012
This is the first study to examine the post-earnings-announcement drift anomaly in a Real Estate Investment Trust (REIT) context. The efficient markets hypothesis suggests that unexpected earnings should be fully incorporated into asset prices soon after being publicly announced. We hypothesize that publicly announced earnings signals may be more certain for REITs due to the presence of a parallel (private) asset market, suggesting less drift for REIT stocks. However, we find a large REIT drift component that is both statistically and economically significant. Furthermore, while the initial earnings surprise response is more muted for REITs, we find that the magnitude of the drift is significantly larger for REITs than for ordinary common stocks (NonREITs). Thus, information does not appear to move between the private and public asset markets in such a way as to render REIT earnings signals more certain than NonREIT earnings signals.
Keywords: REITs, Post-earnings-announcement drift, Market efficiency, Trading rule, UncertaintyAccepted Paper Series
Date posted: January 26, 2012 ; Last revised: June 20, 2012
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