Unifying Underreaction Anomalies
42 Pages Posted: 23 Apr 2002
Date Written: May 2002
This paper asks whether momentum and post-event drift are manifestations of the same underlying mechanism or whether they are separate phenomena. We find that both effects can be attributed to persistence in returns following news which affects expected earnings or earnings growth. Holding these quantities fixed, there is no momentum effect, nor is there post-event drift for our sample of events.
Keywords: momentum, underreaction, post-event drift
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