Impact of investors´ trading activity to post-earnings-announcement drift




Vieru M, Perttunen J, Schadewitz H

Laitinen EK, Laitinen T

Acta Wasaensia no 143

PublisherVaasa: Yliopistopaino

2005

Contributions to Accounting, Finance, and Management Science

Acta Wasaensia

143

952-476-098-3

http://www.uva.fi/materiaali/pdf/isbn_952-476-098-3.pdf



This study focuses on whether post-earnings-announcement drift is associated with the trading activity of non-institutional trading in an emerging market. We separate the stock trading activity of Finnish households into five trading classes. Data is all trades executed on the Helsinki Stock Exchange during 1996-2000. Results show that when earnings news contains only moderate price effects no clear evidence is found to show that trading by any of the specified non-institutional trading activity classes is particularly associated with price changes. However, excess buying of passive and intermediate individual investors after extremely negative earnings news seems to intensify the negative post-earnings returns. Also for extremely positive earnings news trading by individuals seems to be related to the post-earnings returns. In that sense post-earnings retruns are related with the trading of non-institutional activity classes. However, the net trading of non-institutional investors with different trading activities on the announcement day does not affect the correlation between earnings surprises and subsequent returns. This suggests that the net trading of non-institutional investors´ trading activity on the announcement event does not predict subsequent returns.



Last updated on 2024-26-11 at 16:45