Unifying Underreaction Anomalies

Andrew Jackson
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Andrew Jackson: London Business School

The Journal of Business, 2006, vol. 79, issue 1, 75-114

Abstract: This paper asks whether momentum and postevent drift are manifestations of the same underlying mechanism or are separate phenomena. We find that both effects can be attributed to persistence in returns following news that affects expected earnings or earnings growth. Holding these quantities fixed, there is no momentum effect, nor is there postevent drift for our sample of events, which includes seasoned equity offerings, repurchases, equity-financed mergers, and dividend initiations and omissions. The implication is that return continuation follows fundamental news in general, and in aggregate, this explains momentum.

Date: 2006
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:79:y:2006:i:1:p:75-114

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