Stock Returns Following Profit Warnings: A Test of Models of Behavioural Finance

George Bulkley (), Richard D.F. Harris and Renata Herrerias

No 37, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: Models in behavioural finance have been developed to explain apparent anomalies in stock returns. A property common to a number of these models is that agents under react in the short run to public signals about future earnings. This contrasts sharply with the popular informal belief that stock prices overreact to news. A behavioural model also predicts returns reversals over longer horizons. We examine stock returns following profit warnings to test which, if any, of these hypotheses stands up to scrutiny on a new data set which was generated by a process which corresponds closely to that assumed in the behavioural models.

New Economics Papers: this item is included in nep-fin and nep-fmk
Date: 2002-08-29

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Persistent link: http://EconPapers.repec.org/RePEc:ecj:ac2002:37

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