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Post-Earnings Announcement Drift and Market Participants' Information Processing Biases
Review of Accounting Studies (2003)
  • Lihong Liang, The George Washington University

Prior research has been unable to explain the phenomenon known as post-earnings announcement drift, raising questions concerning the semi-strong form efficiency of the market typically assumed in capital market research. This study contributes to our understanding of this anomaly by examining drift in the context of theories that consider investors' non-Bayesian behaviors. The empirical evidence reveals that investors' overconfidence about their private information and the reliability of the earnings information are two important factors that explain drift. Finally, this study also provides insight into the puzzling relationship between dispersion and drift discussed in prior research.

  • post-earnings announcement drift,
  • market efficiency,
  • overconfidence,
  • non-Bayesian behavior,
  • uncertainty,
  • forecast dispersion
Publication Date
Publisher Statement
Copyright 2003 Review of Accounting Studies. This article may be downloaded for personal use only. Any other use requires prior permission of the author and Review of Accounting Studies. The article may be found at DOI:10.1023/A:1024429915810
Citation Information
“Post-Earnings Announcement Drift and Market Participants’ Information Processing Biases”, Review of Accounting Studies, 8, 2003, p.321-345.