TITLE:
Post-Earnings-Announcement Drift Anomaly in India: A Test of Market Efficiency
AUTHORS:
Harshita, Shveta Singh, Surendra S. Yadav
KEYWORDS:
Standardized Unexpected Earnings (SUE), Post-Earnings-Announcement-Drift (PEAD), Earnings Momentum, Indian Stock Market, Market Efficiency, Mar-ket Anomalies
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.14,
October
26,
2018
ABSTRACT: Anomalies are deviations from Efficient Market
Hypothesis (EMH), one of the primary areas of research in the field of
financial economics. The paper aims to examine the presence of one such
deviation—the post-earnings-announcement-drift
(PEAD) anomaly—in the Indian stock market over the period 2002 to 2017.
Examining the PEAD anomaly appears to be an under-researched area for India,
one of the fastest growing major economies of the world. Cross-sectional Fama
and MacBeth [1] regression and paired t-test are the tools employed for the analysis.
The results exhibit statistically significant PEAD and the findings are robust
to sub-period analysis. The anomaly persists even after accounting for other
variables—beta, market capitalization, price-to-book ratio (P/B ratio),
illiquidity and idiosyncratic volatility. While regulators can employ the findings as input to
meet their aim of achieving market efficiency, traders and investors can design
their strategies to exploit the anomalous behavior.