Post-Earnings Announcement Drift: The Role of Earnings Volatility

Ben Mhamed Yosra; Jilani Fawzi

doi:doi:10.11648/j.jfa.20150303.11

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Post-Earnings Announcement Drift: The Role of Earnings Volatility

Ben Mhamed Yosra, Jilani Fawzi

Published in Journal of Finance and Accounting (Volume 3, Issue 3)

Received: 10 March 2015 Accepted: 19 March 2015 Published: 28 March 2015

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Abstract

The study reported here consisted of examining the market’s reactions to the volatility effect on time series correlations of earnings in a post-earnings announcement drift context. Sample in this study comprises of 295 Canadian firms and covers 2006-2011 period. Firstly, our results show that earnings volatility is inversely related to earnings persistence (under the AR(1) and the Foster model assumption). Secondly, our findings confirm the aggravated negative effect of earnings volatility on seasonal unexpected earnings persistence. Finally, following Mishkin’s (1983) method of testing market efficiency, this study supports that capital market recognizes the earnings volatility effect on earnings persistence. Our results contribute to understanding the role of earnings volatility in explaining the persistence of PEAD.

Published in	Journal of Finance and Accounting (Volume 3, Issue 3)
DOI	10.11648/j.jfa.20150303.11
Page(s)	35-41
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2015. Published by Science Publishing Group

Keywords

Earnings-Announcement Drift, Earnings Volatility, Standardized Unexpected Earnings

References

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[5]	Bernard V.L. and Thomas J.K. (1990), “Evidence That Stock Prices Do Not Fully Reflect the Implications of Current Earnings for Future Earnings”, Journal of Accounting and Economics, Vol.13, n°4, pp. 305-340.
[6]	Bhushan R. (1994), « An informational efficiency perspective on the post-earnings announcement drift », Journal of Accounting and Economics, Vol.18, pp.45-65.
[7]	Brown L.D. (1993), “Earnings forecasting research: its implications for capital markets research”, International Journal of Forecasting, Vol. 9, pp. 295–320.
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[9]	Changling Chen. (2013), “Time-Varying Earnings Persistence and the Delayed Stock Return Reaction to Earnings Announcements”, Contemporary Accounting Research, Vol.30, n°2, pp.549–578.
[10]	Chen C., Huang A.G. and Jha R. (2008), « Trends in Earnings Volatility, Earnings Quality and Idiosyncratic Return Volatility: Managerial Opportunism or Economic Activity », School of Accounting and Finance, University of Waterloo.
[11]	Dichev I.D. and Tang V.W., (2009), “Earnings volatility and earnings predictability”, Journal of Accounting and Economics, Vol.47, pp.160-181.
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[17]	Hamzavi M.A. and Aflatooni A. (2011), « Earnings Smoothing and Earnings Predictability », Business Intelligence Journal, pp. 187-201.
[18]	Khodadadi V., Tamjidi N., Fazeli Y.S. and Hushmandi K.B. (2012), « Earnings Predictability and its Components Volatility », International Reserch Journal of Finance and Economics, Vol.86, pp.72-85.
[19]	Minton B., Schrand C. and Walther B. (2002), « The Role of Volatility in Forecasting”, Review of Accounting Studies, Vol. 7, pp. 195–215.
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APA Style

Ben Mhamed Yosra, Jilani Fawzi. (2015). Post-Earnings Announcement Drift: The Role of Earnings Volatility. Journal of Finance and Accounting, 3(3), 35-41. https://doi.org/10.11648/j.jfa.20150303.11

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ACS Style

Ben Mhamed Yosra; Jilani Fawzi. Post-Earnings Announcement Drift: The Role of Earnings Volatility. J. Finance Account. 2015, 3(3), 35-41. doi: 10.11648/j.jfa.20150303.11

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AMA Style

Ben Mhamed Yosra, Jilani Fawzi. Post-Earnings Announcement Drift: The Role of Earnings Volatility. J Finance Account. 2015;3(3):35-41. doi: 10.11648/j.jfa.20150303.11

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@article{10.11648/j.jfa.20150303.11,
  author = {Ben Mhamed Yosra and Jilani Fawzi},
  title = {Post-Earnings Announcement Drift: The Role of Earnings Volatility},
  journal = {Journal of Finance and Accounting},
  volume = {3},
  number = {3},
  pages = {35-41},
  doi = {10.11648/j.jfa.20150303.11},
  url = {https://doi.org/10.11648/j.jfa.20150303.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20150303.11},
  abstract = {The study reported here consisted of examining the market’s reactions to the volatility effect on time series correlations of earnings in a post-earnings announcement drift context. Sample in this study comprises of 295 Canadian firms and covers 2006-2011 period. Firstly, our results show that earnings volatility is inversely related to earnings persistence (under the AR(1) and the Foster model assumption). Secondly, our findings confirm the aggravated negative effect of earnings volatility on seasonal unexpected earnings persistence. Finally, following Mishkin’s (1983) method of testing market efficiency, this study supports that capital market recognizes the earnings volatility effect on earnings persistence. Our results contribute to understanding the role of earnings volatility in explaining the persistence of PEAD.},
 year = {2015}
}

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TY  - JOUR
T1  - Post-Earnings Announcement Drift: The Role of Earnings Volatility
AU  - Ben Mhamed Yosra
AU  - Jilani Fawzi
Y1  - 2015/03/28
PY  - 2015
N1  - https://doi.org/10.11648/j.jfa.20150303.11
DO  - 10.11648/j.jfa.20150303.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 35
EP  - 41
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20150303.11
AB  - The study reported here consisted of examining the market’s reactions to the volatility effect on time series correlations of earnings in a post-earnings announcement drift context. Sample in this study comprises of 295 Canadian firms and covers 2006-2011 period. Firstly, our results show that earnings volatility is inversely related to earnings persistence (under the AR(1) and the Foster model assumption). Secondly, our findings confirm the aggravated negative effect of earnings volatility on seasonal unexpected earnings persistence. Finally, following Mishkin’s (1983) method of testing market efficiency, this study supports that capital market recognizes the earnings volatility effect on earnings persistence. Our results contribute to understanding the role of earnings volatility in explaining the persistence of PEAD.
VL  - 3
IS  - 3
ER  -

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Author Information

Ben Mhamed Yosra

Department of finance, Faculty of Economic sciences and Management of Tunis, University of Tunis El Manar, Tunisia
Jilani Fawzi

Department of finance, Faculty of Economic sciences and Management of Tunis, University of Tunis El Manar, Tunisia

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APA Style

Ben Mhamed Yosra, Jilani Fawzi. (2015). Post-Earnings Announcement Drift: The Role of Earnings Volatility. Journal of Finance and Accounting, 3(3), 35-41. https://doi.org/10.11648/j.jfa.20150303.11

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ACS Style

Ben Mhamed Yosra; Jilani Fawzi. Post-Earnings Announcement Drift: The Role of Earnings Volatility. J. Finance Account. 2015, 3(3), 35-41. doi: 10.11648/j.jfa.20150303.11

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AMA Style

Ben Mhamed Yosra, Jilani Fawzi. Post-Earnings Announcement Drift: The Role of Earnings Volatility. J Finance Account. 2015;3(3):35-41. doi: 10.11648/j.jfa.20150303.11

Copy | Download

@article{10.11648/j.jfa.20150303.11,
  author = {Ben Mhamed Yosra and Jilani Fawzi},
  title = {Post-Earnings Announcement Drift: The Role of Earnings Volatility},
  journal = {Journal of Finance and Accounting},
  volume = {3},
  number = {3},
  pages = {35-41},
  doi = {10.11648/j.jfa.20150303.11},
  url = {https://doi.org/10.11648/j.jfa.20150303.11},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jfa.20150303.11},
  abstract = {The study reported here consisted of examining the market’s reactions to the volatility effect on time series correlations of earnings in a post-earnings announcement drift context. Sample in this study comprises of 295 Canadian firms and covers 2006-2011 period. Firstly, our results show that earnings volatility is inversely related to earnings persistence (under the AR(1) and the Foster model assumption). Secondly, our findings confirm the aggravated negative effect of earnings volatility on seasonal unexpected earnings persistence. Finally, following Mishkin’s (1983) method of testing market efficiency, this study supports that capital market recognizes the earnings volatility effect on earnings persistence. Our results contribute to understanding the role of earnings volatility in explaining the persistence of PEAD.},
 year = {2015}
}

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TY  - JOUR
T1  - Post-Earnings Announcement Drift: The Role of Earnings Volatility
AU  - Ben Mhamed Yosra
AU  - Jilani Fawzi
Y1  - 2015/03/28
PY  - 2015
N1  - https://doi.org/10.11648/j.jfa.20150303.11
DO  - 10.11648/j.jfa.20150303.11
T2  - Journal of Finance and Accounting
JF  - Journal of Finance and Accounting
JO  - Journal of Finance and Accounting
SP  - 35
EP  - 41
PB  - Science Publishing Group
SN  - 2330-7323
UR  - https://doi.org/10.11648/j.jfa.20150303.11
AB  - The study reported here consisted of examining the market’s reactions to the volatility effect on time series correlations of earnings in a post-earnings announcement drift context. Sample in this study comprises of 295 Canadian firms and covers 2006-2011 period. Firstly, our results show that earnings volatility is inversely related to earnings persistence (under the AR(1) and the Foster model assumption). Secondly, our findings confirm the aggravated negative effect of earnings volatility on seasonal unexpected earnings persistence. Finally, following Mishkin’s (1983) method of testing market efficiency, this study supports that capital market recognizes the earnings volatility effect on earnings persistence. Our results contribute to understanding the role of earnings volatility in explaining the persistence of PEAD.
VL  - 3
IS  - 3
ER  -

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