Short-term Post-Earnings Announcement Effects:

Nedanstående innehåll är skapat av Mimers Brunns besökare. Kommentera arbete

Stock prices usually react quickly to new information released at an earnings announcement. However, sometimes stock prices seem to continue to move over a period of time after the initial effect. Such movements are called post-earnings announcement effects. The effects can take two shapes, either the price moves in the same direction as the initial reaction (a momentum) or it moves in the opposite direction (a reversal). The existence of such effects is in violation of the Efficient Market Hypothesis and is called an anomaly. This thesis investigates the post-earnings announcement phenomenon for Swedish stocks during 10 years from 1997 to 2007 by using a trading strategy beginning on the day after the earnings announcement. Quintile portfolios are formed using two metrics: initial abnormal return (IAR) and initial abnormal volume (IAV). These metrics are used for sorting the stocks into quintile portfolios. A market–neutral position is created using a long/short strategy and positions are held for up to 60 trading days. These trading strategies earn annualized abnormal returns of about 11% using on the IAR metric and about 8% using the IAV metric. A joint strategy that uses both metrics generate more than three times as much in annualized abnormal return. Although these findings suggest that post-earnings announcement effects ar...