Individual investors and post-earnings-announcement drift: Evidence from Korea

Yunsung Eom, Jaehoon Hahn and Wook Sohn

Pacific-Basin Finance Journal, 2019, vol. 53, issue C, 379-398

Abstract: This paper presents empirical evidence supporting the hypothesis that individual investors’ news-contrarian trading behavior drives post-earnings-announcement drift (PEAD). We find that after the announcement, individuals tend to trade in the opposite direction to earnings surprise, which impedes a full price response to earnings news, leading to under-reaction and PEAD. Moreover, we find that PEAD exists only for those stocks that individuals trade in the opposite direction to earnings news, and that the magnitudes of PEAD are greater for those stocks that are more intensely sold (for positive earnings surprise) and bought (for negative earnings surprise) by individuals.

Keywords: Post-earnings-announcement drift; Market efficiency; Underreaction; Individual investors (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:53:y:2019:i:c:p:379-398

DOI: 10.1016/j.pacfin.2018.12.002

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