Jump on the Post-Earnings Announcement Drift

Posted: 26 May 2012

See all articles by Haigang Zhou

Haigang Zhou

Cleveland State University - Nance College of Business Administration

John Qi Zhu

Date Written: May 25, 2012

Abstract

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

Suggested Citation

Zhou, Haigang and Zhu, John Qi, Jump on the Post-Earnings Announcement Drift (May 25, 2012). Financial Analysts Journal, Vol. 68, No. 3, 2012. Available at SSRN: https://ssrn.com/abstract=2066854

Haigang Zhou (Contact Author)

Cleveland State University - Nance College of Business Administration ( email )

2121 Euclid Avenue
Department of Finance, BU 215
Cleveland, OH 44115-2214
United States

No contact information is available for John Qi Zhu

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