Abstract This paper investigates the informativeness and value relevance of analyst target prices in context mergers acquisitions. Our results indicate that firms with high 12‐month ahead relative to current stock are more likely become a takeover offer premium, acquirers’ announcement returns positively associated firms’ price premium. We also show long‐short trading strategy formed on likelih...

We collect a unique dataset of Twitter posts to examine the change in investor disagreement around earnings announcements. We find that investors’ opinions can either converge (reduced disagreement) or diverge (increased disagreement) around earnings announcements. While the convergence of opinion is associated with lower earnings announcement returns, the divergence of opinion is associated wi...

This study examines how individual investor trade in response to quarterly earnings surprises and the relation of trades to subsequent returns. Individuals are highly significant net buyers after negative earnings surprises; net buying is weaker after positive surprises. There is no indication that trading by any of our investor subcategories explains the concentration of drift at subsequent ea...

On average, straddles on individual stocks earn significantly negative returns: daily holding period return is -0.19% and weekly holding period return is -2.09%. In sharp contrast, straddle returns are significantly positive around earnings announcements: average at-the-money straddle returns from one day before earnings announcement to the earnings announcement date yields a highly significant...

The gambler’s fallacy (Rabin, 2002) predicts that trends bias investor expectations. Consistent with this prediction, we find that investors underreact to streaks of consecutive earnings surprises with the same sign. When the most recent earnings surprise extends a streak, post-earnings announcement drift is strong and significant. In contrast, the drift is negligible following the termination ...

The paper develops a theory for equity premium around macroeconomic announcements. Stock returns realized around pre-scheduled macroeconomic announcements, such as the employment report and the FOMC statements, account for 55% of the market equity premium during the 1961-2014 period, and virtually 100% of it during the later period of 1997-2014, where more announcement data are available. We pr...

This study examines annual earnings announcements for Chinese A-shares, a market dominated by retail investors where short selling is prohibited. We document a significant tendency for A-share prices to increase on the days, both, before and after the earnings announcement date. In contrast, we find a significant tendency for A-share prices to decline on the day of the announcement, immediately...

There is a positive association between stock-for-stock acquirers’ pre-merger abnormal accruals and post-merger announcement lawsuits. The market only partially anticipates the effects of post-merger announcement lawsuits at the merger announcement and the post-merger announcement long-term market underperformance is largely limited to litigated acquisitions. Overall, the evidence suggests that...

The volatility of future earnings growth is a significant determinant of Fama and French’s Value premium. We use a stochastic earnings model of firm valuation to establish a formal link between the volatility of future earnings growth and the value premium. Furthermore we empirically confirm this relationship at the macro-level.