Foreign vs domestic investors and the post‐announcement drift

G. Geoffrey Booth, Juha‐Pekka Kallunki, Petri Sahlström and Jaakko Tyynelä

International Journal of Managerial Finance, 2011, vol. 7, issue 3, 220-237

Abstract: Purpose - This paper aims to investigate who causes post‐announcement drift and whether this drift is observed for various types of news announcements. Design/methodology/approach - Using Finnish share ownership data, the authors examine the trading behavior of foreign and domestic investors during the post‐announcement periods of scheduled earnings and unscheduled non‐earnings announcements. Findings - The results show that the post‐announcement drift exists for both types of news, but only if the news is negative. As a group, foreign investors react first by selling shares of firms reporting negative information. Domestic investors act in the opposite manner. Originality/value - The results imply that the post‐announcement drift is a special case of a more general post‐disclosure phenomenon and that investor differences (most likely information processing skills) is one likely explanation for its pervasiveness.

Keywords: Announcements; Investors; Behaviour; Under‐reaction; Earnings; Disclosure (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:v:7:y:2011:i:3:p:220-237

DOI: 10.1108/17439131111144441

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