Halo, horn, or dark horse biases: Corporate reputation and the earnings announcement puzzle
Woan-Yuh Jang,
Jie-Haun Lee and
Hsueh-Chin Hu
Journal of Empirical Finance, 2016, vol. 38, issue PA, 272-289
Abstract:
The primary goal of this study is to explore whether the halo, horn, or dark horse effects manifest in U.S. stock markets. To investigate the issue, an ideal empirical framework is newly created by combining a proxy for previous corporate perception, corporate reputation, with a well-known financial market anomaly, the earnings announcement puzzle. The interdisciplinary research presented in this study is original in its methodological design. Using companies listed and traded on the NASDAQ, NYSE, and AMEX between the first quarter of 2006 and the second quarter of 2011, the results show that investors' buying behaviors are influenced by significant horn and dark horse effects in the stock markets. Our findings suggest a short-term trading strategy that adopts long (short) positions in low-reputation stocks with the highest (lowest) class of earnings surprise over the three-day period surrounding the earnings announcements, generating a premium of 9.984%. On the basis of the price reversal effect, our results reveal a long-term trading strategy that adopts long (short) positions in low-reputation stocks with the lowest (highest) class of earnings surprises, starting from two days after the earnings announcement. The long-short positions for thirty, forty-five and sixty consecutive trading days will respectively generate premiums of 2.672%, 5.918%, and 7.602%.
Keywords: Corporate reputation; Earnings announcement puzzle; Halo effect; Horn effect; Dark horse effect (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S092753981630069X
Full text for ScienceDirect subscribers only
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:38:y:2016:i:pa:p:272-289
DOI: 10.1016/j.jempfin.2016.07.005
Access Statistics for this article
Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff
More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().