The Accounting Review Vol. 83 No. 6 2008

Do Individual Investors Cause Post-Earnings Announcement Drift? Direct Evidence from Personal Trades

David Hirshleifer¹; James N. Myers²; Linda A. Myers²; Siew Hong Teoh¹

¹ University of California, Irvine · ² University of Arkansas

Abstract

This study tests whether nai¨ve trading by individual investors, or some class of individual investors, causes post-earnings announcement drift (PEAD). Inconsistent with the individual trading hypothesis, individual investor trading fails to subsume any of the power of extreme earnings surprises to predict future abnormal returns. Moreover, individuals are significant net buyers after both negative and positive extreme earnings surprises, consistent with an attention effect, but not with their trades causing PEAD. Finally, we find no indication that trading by individuals explains the concentration of drift at subsequent earnings announcement dates.

DOI

10.2308/accr.2008.83.6.1521

Volume

83

Issue

6

Pages

1521-1550

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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