Post-Earnings Announcement Drift: The Role of Earnings Volatility
Journal of Finance and Accounting
Volume 3, Issue 3, May 2015, Pages: 35-41
Received: Mar. 10, 2015; Accepted: Mar. 19, 2015; Published: Mar. 28, 2015
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Authors
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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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.
Keywords
Earnings-Announcement Drift, Earnings Volatility, Standardized Unexpected Earnings
To cite this article
Ben Mhamed Yosra, Jilani Fawzi, Post-Earnings Announcement Drift: The Role of Earnings Volatility, Journal of Finance and Accounting. Vol. 3, No. 3, 2015, pp. 35-41. doi: 10.11648/j.jfa.20150303.11
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