Investment Horizon of Shareholders and Post-Earnings-Announcement Drift

32 Pages Posted: 6 Jan 2015 Last revised: 2 Dec 2015

See all articles by Min Kyeong Kwon

Min Kyeong Kwon

Korea Capital Market Institute

Tong Suk Kim

KAIST College of Business

Date Written: March 15, 2015

Abstract

We hypothesize that post-earnings-announcement drift (PEAD) is caused by underreaction of long-term investors since they do not pay much attention to short-term events. Consistent with the hypothesis, empirical observations show that stocks mostly held by long-term investors exhibit strong PEAD, while stocks mostly held by short-term investors does not. The results are still robust even after transaction costs, investor recognition, temporal inattention, and reversal in earnings surprises are controlled for.

Keywords: Post-Earnings-Announcement Drift, Investment Horizon, Portfolio Turnover Level

JEL Classification: G10, G11, G12

Suggested Citation

Kwon, Min Kyeong and Kim, Tong Suk, Investment Horizon of Shareholders and Post-Earnings-Announcement Drift (March 15, 2015). Available at SSRN: https://ssrn.com/abstract=2545189 or http://dx.doi.org/10.2139/ssrn.2545189

Min Kyeong Kwon (Contact Author)

Korea Capital Market Institute ( email )

Korea, Republic of (South Korea)

Tong Suk Kim

KAIST College of Business ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul, 130-722
Korea, Republic of (South Korea)

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