Trading frictions and the Post-earnings-announcement drift

Josef Fink, Stefan Palan () and Erik Theissen

Journal of Economics and Business, 2024, vol. 132, issue C, No S0148619524000584

Abstract: We use laboratory experiments to analyze how the existence of trading frictions (a transaction fee and bans on short selling and margin buying) affects the occurrence and strength of the post-earnings-announcement drift. We find less trading activity and higher asset prices in the presence of frictions. While the initial price reaction to earnings announcements is weaker, the strength of the PEAD is not materially affected. Trading strategies aimed at exploiting the PEAD are less profitable in the presence of frictions.

Keywords: Post-earnings-announcement drift; Trading frictions; Experimental asset markets (search for similar items in EconPapers)
JEL-codes: G12 G14 G40 M41 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:132:y:2024:i:c:s0148619524000584

DOI: 10.1016/j.jeconbus.2024.106216

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