A Research About Post-Earnings Announcement Drift Based On Quarterly Data

The post-earnings announcement drift refers to the phenomenon of the listed company's earnings report released after the regular period, the good news announced surplus, its yield will be in excess surplus notice after a certain period of time continued upward fluctuations in the same way, the bad news announced earnings shares in the corresponding period in excess rate of return will continue downward fluctuation phenomena. It is in a financial study of the financial markets is very important phenomena in the United States and other developed countries are prevalent in the stock market. The existence of this phenomenon once again break the Effective Market Hypothesis, and also the research about this phenomenon will help us to understand how the information is transmitted.In this paper, using the standardized methods abroad I tested the quarterly earnings data of 2002-2006 Shanghai Stock Exchange listed company, I found that China's stock market similar to the above-mentioned shares of listed companies after a public announcement on the surplus projected surplus along the direction of the ongoing adjustment phenomenon. But with foreign developed markets difference is that this adjustment has some timely asymmetrical characteristics, namely, the companies which release "bad news" have a maximum downward adjustment in the 70 trading days after the report released, and the companies which release "good news" have a maximum upward adjustment in the 120 trading days after the report released. Based on the reality of China's restrictions on stock short selling and some other domestic research about the effect of institute sharehold on post-earnings announment drift, we speculate that the reasons for the emergence of the unusual phenomenon of drift is the result of the integration of underreaction and overspeculation, which means that the institute investor make use of the market underreaction under the good news circumstance. And with the bad news condition,the institute investor have no enough power to implement the speculate operation because of the restriction of shortselling. This resulted in the results above that the "good news" portfolio has a longer drift than the "bad news" portfolio. Further testing classified according to the size of the firms indicates that the drift phenomenon is jointly contributed by the upward drift of large companies and the downward drift of small companies. We believe the reason is that the large companies generally have a "size premium" and the market has a preference for large companies, while small companies are more vulnerable to bad news due to the high volatility of earnings, but we are not sure about that whether the size effect on drift characteristics is still a reflection of underreaction.