Market Uncertainty and Sentiment, and the Post-Earnings Announcement Drift

43 Pages Posted: 19 Aug 2011 Last revised: 14 Oct 2011

See all articles by Ronald Geoffrey Bird

Ronald Geoffrey Bird

University of Technology Sydney (UTS) - School of Finance and Economics; Financial Research Network (FIRN)

Daniel F.S. Choi

The University of Waikato

Danny Yeung

University of Technology Sydney (UTS); Financial Research Network (FIRN)

Date Written: August 18, 2011

Abstract

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

Bird, Ronald Geoffrey and Choi, Daniel F.S. and Yeung, Danny, Market Uncertainty and Sentiment, and the Post-Earnings Announcement Drift (August 18, 2011). 24th Australasian Finance and Banking Conference 2011 Paper, Available at SSRN: https://ssrn.com/abstract=1912195 or http://dx.doi.org/10.2139/ssrn.1912195

Ronald Geoffrey Bird

University of Technology Sydney (UTS) - School of Finance and Economics ( email )

Haymarket
Sydney, NSW 2007
Australia
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Financial Research Network (FIRN)

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Australia

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Daniel F.S. Choi (Contact Author)

The University of Waikato ( email )

Private Bag 3105
Hamilton, 3105
New Zealand
647 838 4973 (Phone)
647 838 4331 (Fax)

Danny Yeung

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Financial Research Network (FIRN) ( email )

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

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