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

Posted: 4 Jun 2008 Last revised: 19 Oct 2008

See all articles by David A. Hirshleifer

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business; National Bureau of Economic Research (NBER)

James N. Myers

University of Tennessee, Knoxville - College of Business Administration

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management

Siew Hong Teoh

UCLA Anderson School of Management

Multiple version iconThere are 2 versions of this paper

Abstract

This study tests whether na¿ve 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.

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

JEL Classification: G14, M41

Suggested Citation

Hirshleifer, David A. and Myers, James N. and Myers, Linda A. and Teoh, Siew Hong, Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades. Accounting Review, November 2008, Available at SSRN: https://ssrn.com/abstract=1139853

David A. Hirshleifer

University of California, Irvine - Paul Merage School of Business ( email )

Paul Merage School of Business
Irvine, CA California 92697-3125
United States

HOME PAGE: http://sites.uci.edu/dhirshle/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

James N. Myers (Contact Author)

University of Tennessee, Knoxville - College of Business Administration ( email )

Haslam Business Building
Knoxville, TN
United States

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management ( email )

Knoxville, TN
United States

Siew Hong Teoh

UCLA Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

HOME PAGE: http://www.anderson.ucla.edu/faculty-and-research/accounting/faculty/teoh

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