Market Uncertainty and Sentiment, and the Post-Earnings Announcement Drift
43 Pages Posted: 19 Aug 2011 Last revised: 14 Oct 2011
Date Written: August 18, 2011
The post-earnings announcement drift (PEAD) first identified over 40 years ago seems to be as much alive today as it ever was. Numerous attempts have been made to explain its continued existence. In this paper we provide evidence to support a new explanation: that the PEAD is a reflection of the level of market uncertainty and sentiment that prevails during the post-announcement period. The finding that uncertainty plays a role in explaining how investors respond to information suggests that it should be included as a factor in pricing models while the fact that market sentiment also has a role is another instance of the importance of human behaviour in establishing prices.
Keywords: Uncertainty, Post-Earnings Announcement Drift, Sentiment
JEL Classification: G14, M41
Suggested Citation: Suggested Citation