Post-earnings-announcement Drift in the UK
Nottingham University Business School
Norman C. Strong
University of Manchester - Manchester Business School
Peking University - Guang Hua School of Management
LUMS Working Paper No. 2000/010
This paper fills a void in the market efficiency literature by testing for the presence of post-earnings announcement drift in the non-US market. We test for drift using alternative earnings surprise measures based on: (i) the time-series of earnings; (ii) market prices; and (iii) analyst forecasts. Using each of the measures we find evidence of significant post-earnings-announcement drift, robust to alternative controls for risk and market microstructure effects. Using a one-dimensional analysis, the price-based measure of earnings surprise gives the strongest drift, and using a two-dimensional analysis the drift associated with the price-based measure almost subsumes drift associated with the other two measures. Our conclusion is that the UK stock market is inefficient with respect to publicly available corporate earnings information. This evidence provides out-of-sample confirmation of the post-earnings-announcement drift documented in the US.
Number of Pages in PDF File: 48
Keywords: Post-earnings-announcement drift, market efficiency, earnings surprises
JEL Classification: G14, M41working papers series
Date posted: January 25, 2001
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo4 in 0.438 seconds