Behavioral Biases and Post-Earnings Announcement Drift
Prof. Rubin HAO
Assistant Professor in Accounting
FBA, UM
Date: 7 October 2024 (Monday)
Time: 13:00 to 14:00
Venue: FBA Lobby
Abstract
Utilizing account-level trading data, we conduct a horse race of behavioral explanations for the post-earnings announcement drift (PEAD). We find that among all the behavioral biases, overconfidence emerges as the primary driver of PEAD, outperforming other biases such as the disposition effect, distracted attention, and anchoring. In contrast to the U.S. market, retail investors constitute the leading contributors to the PEAD in China, surpassing the influence of institutional investors. Short selling constraints significantly amplify the influence of overconfidence, leading to an asymmetrical earnings drift. Furthermore, trading evidence indicates that overconfident investors are more reluctant (inclined) to sell stocks with bad (good) news around earnings announcements. Additionally, unrealized profits and portfolio size significantly influence investors’ trading behaviors around earnings announcements. Overall, our study sheds light on the behavioral factors underlying PEAD, particularly in the context of retail investor activity and short selling constraints.
Speaker
HAO Rubin currently serves as an assistant professor in Accounting at Faculty of Business Administration, University of Macau. His research interest includes capital market, corporate disclosure and governance.
All are welcome!
