Finance Seminar: Stefan Palan

Earnings Autocorrelation and the Post-Earnings-Announcement Drift

Stefan Palan, University of Graz

Abstract : Post-earnings-announcement drift (PEAD) is one of the most solidly documented asset pricing anomalies in the literature. This paper presents the first investigation into post-earningsannouncement drift (PEAD) under the controlled conditions of an experimental lab. We replicate PEAD in the lab and observe PEAD for firms whose earnings are serially independent.
PEAD is even stronger for firms whose earnings exhibit autocorrelation. We identify profitable trading strategies and report the presence of short-term arbitrage opportunities in most of our markets, but find no evidence of the disposition effect in our data.
(joint work with Josef Fink and Erik Theissen)