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Individualism, Uncertainty Avoidance, and Earnings Momentum in International Markets

47 Pages Posted: 1 Dec 2010  

Yiwen (Paul) Dou

Macquarie University

James E. Hunton

Bentley University - Department of Accountancy; Erasmus University

Cameron Truong

Monash University; Financial Research Network (FIRN)

Madhu Veeraraghavan

T.A. PAI Management Institute, Finance Area

Multiple version iconThere are 2 versions of this paper

Date Written: November 29, 2010

Abstract

The literature shows that price and earnings momentum returns cannot be fully explained by risk-based theories. In an attempt to better understand the price momentum anomaly, Chui et al. [2010] document that the cultural factor of "individualism" influences price momentum returns, but that the cultural factor of "uncertainty avoidance" does not. The current study extends Chui et al. [2010] by examining the influence of individualism and uncertainty avoidance on earnings momentum profits, as theory suggests that unique characteristics associated with earnings momentum, relative to price momentum, give rise to significant effects for both these cultural factors. Using data from 41 countries, we show that the level of individualism in a country is positively associated with earnings momentum profits and that the level of uncertainty avoidance is negatively associated with earnings momentum profits. This study contributes to the ongoing quest to better understand the earnings momentum phenomenon.

Keywords: post-earnings announcement drift, individualism, earnings momentum, uncertainty avoidance, culture

Suggested Citation

Dou, Yiwen (Paul) and Hunton, James E. and Truong, Cameron and Veeraraghavan, Madhu, Individualism, Uncertainty Avoidance, and Earnings Momentum in International Markets (November 29, 2010). Finance and Corporate Governance Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1717224 or http://dx.doi.org/10.2139/ssrn.1717224

Yiwen (Paul) Dou

Macquarie University ( email )

North Ryde
Sydney, New South Wales 2109
Australia

James E. Hunton

Bentley University - Department of Accountancy ( email )

175 Forest Street
Waltham, MA 02452
United States

Erasmus University

Rotterdam
Netherlands

Cameron Truong

Monash University ( email )

Wellington Road
Victoria, Roodepoort 3145
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Madhu Veeraraghavan (Contact Author)

T.A. PAI Management Institute, Finance Area ( email )

Bangalore
Manipal, Karnataka 576104
India
+91-820-2701030 (Phone)

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