Post-Earnings Announcement Drift?

Posted: 8 Jul 1998

See all articles by Stephen J. Brown

Stephen J. Brown

New York University - Stern School of Business

Peter F. Pope

Bocconi University; London School of Economics and Political Science

Date Written: February 1996

Abstract

The predictability of abnormal returns based on information contained in past earnings announcements is an anomaly that is statistically and economically significant. It is neither illusory, nor an artifact of the experimental design. It may be a result of market inefficiency. Our results cannot rule out this explanation. However, we find that earnings change numbers are associated with the probabilities that firms leave the sample through acquisition, bankruptcy and for other reasons, and with the probability that they are not included in the sample in the first place. Moreover, we find that the magnitude of the post-earnings announcement effect is correlated with factors that proxy for the ex ante probability of the firm surviving to be part of the earnings surprise sample. It also appears to be related to determinants of the bid-ask spread.

JEL Classification: G14, M41

Suggested Citation

Brown, Stephen J. and Pope, Peter F., Post-Earnings Announcement Drift? (February 1996). Available at SSRN: https://ssrn.com/abstract=2587

Stephen J. Brown (Contact Author)

New York University - Stern School of Business ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States
212-998-0306 (Phone)
212-995-4233 (Fax)

Peter F. Pope

Bocconi University ( email )

Dept of Accounting
Milan, 20136
Italy

London School of Economics and Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

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