Jump on the Post-Earnings Announcement Drift
Posted: 26 May 2012
Date Written: May 25, 2012
The authors examined the potential profitability of a strategy that exploits the post-earnings announcement drifts contingent on jump dynamics identified in stock prices around earnings announcements. With long positions in positive-jump stocks and short positions in negative-jump stocks, their hedge portfolio achieved an annualized abnormal return of 15.3% and an annualized Sharpe ratio of 1.52 over the last four decades. Neither conventional risk factors nor common company characteristics explain the abnormal return.
Keywords: Equity Investments, Equity Market Valuation and Return Analysis, Portfolio Management, Equity Portfolio Management Strategies, Portfolio Concepts from Capital Market Theory, Efficient Market Hypothesis
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