The High-Volume Return Premium and Post-Earnings Announcement Drift
Author | : Alina Lerman |
Publisher | : |
Total Pages | : 43 |
Release | : 2008 |
ISBN-10 | : OCLC:1290303396 |
ISBN-13 | : |
Rating | : 4/5 ( Downloads) |
Download or read book The High-Volume Return Premium and Post-Earnings Announcement Drift written by Alina Lerman and published by . This book was released on 2008 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the relationship among trading volume around earnings announcements, earnings forecast errors, and subsequent returns. Prior research finds a positive relation between earnings announcement period trading volume and subsequent returns (the high-volume return premium) and between earnings forecast errors and subsequent returns (post-earnings announcement drift). We find that for a sample of firms followed by analysts these effects are complementary, i.e., each retains incremental ability to predict post-earnings announcement returns. Prior research provides two competing explanations for the high-volume return premium: changes in firm visibility versus differences in risk. We provide evidence that seems to rule out risk-based explanations while supporting the visibility hypothesis.