This paper presents empirical evidence supporting the hypothesis that individual investors’ news-contrarian trading behavior drives post-earnings-announcement drift (PEAD). Using data on daily trades by individual, institutional, and foreign investors available in the Korean stock market, we investigate trading behavior of these three groups of investors around earnings announcements. We find that after the announcement, individual investors tend to trade in the opposite direction to earnings surprise, selling good earnings surprise stocks and buying bad earnings surprise stocks, 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.
Keyword: post-earning-announcement drift, market efficiency; underreaction; individual investors
JEL Classification: G12
학회소식
[2016년 제 4차] Individual Investors and Post-Earnings-Announcement
작성자 : 관리자
조회수 : 964
게시일 :
2016-12-21
