Post-Earnings-Announcement Drift in the UK

LUMS Working Paper No. 2000/010

48 Pages Posted: 25 Jan 2001

See all articles by Weimin Liu

Weimin Liu

Nottingham University Business School

Norman C. Strong

University of Manchester - Alliance Manchester Business School

Xinzhong Xu

Peking University - Guanghua School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: July 2000

Abstract

This paper fills a void in the market efficiency literature by testing for the presence of post-earnings announcement drift in the non-US market. We test for drift using alternative earnings surprise measures based on: (i) the time-series of earnings; (ii) market prices; and (iii) analyst forecasts. Using each of the measures we find evidence of significant post-earnings-announcement drift, robust to alternative controls for risk and market microstructure effects. Using a one-dimensional analysis, the price-based measure of earnings surprise gives the strongest drift, and using a two-dimensional analysis the drift associated with the price-based measure almost subsumes drift associated with the other two measures. Our conclusion is that the UK stock market is inefficient with respect to publicly available corporate earnings information. This evidence provides out-of-sample confirmation of the post-earnings-announcement drift documented in the US.

Keywords: Post-earnings-announcement drift, market efficiency, earnings surprises

JEL Classification: G14, M41

Suggested Citation

Liu, Weimin and Strong, Norman Charles and Xu, Gary Xinzhong, Post-Earnings-Announcement Drift in the UK (July 2000). LUMS Working Paper No. 2000/010. Available at SSRN: https://ssrn.com/abstract=249959 or http://dx.doi.org/10.2139/ssrn.249959

Weimin Liu

Nottingham University Business School ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

Norman Charles Strong

University of Manchester - Alliance Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Gary Xinzhong Xu (Contact Author)

Peking University - Guanghua School of Management ( email )

Peking University
Beijing, Beijing 100871
China

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