Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Model
Capital markets react to various corporate announcements, and one such significant announcement is the accounting earnings announcement. If the market is efficient, stock price is near to fair value. Otherwise, the gap between value and price widens and investors could earn abnormal return. Market r...
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doaj-ed3a2a283c294080b83289d073a1b7322020-11-25T00:41:11ZfasAlzahra Universityراهبرد مدیریت مالی2345-32142538-19622013-09-011211410.22051/jfm.2014.959959Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Modelgholamreza kordestani0seideh sepid-dast1Reyhaneh larijani2imam khomeini universityRaja Higher education centertehran universityCapital markets react to various corporate announcements, and one such significant announcement is the accounting earnings announcement. If the market is efficient, stock price is near to fair value. Otherwise, the gap between value and price widens and investors could earn abnormal return. Market reaction to the firm news may be from the type (1) Rapid reaction (information predicted before announcement), (2) Efficient reaction (at time of announcement), and (3) Under-Reaction (after announcement) and (4) Over-Reaction (after announcement). If the market is efficient, stock price nears the fair value. When the market is not efficient, the incorrect investors’ decisions change the stock price less than or more than expected. In this study, the under-reaction of investors is investigated using the stochastic frontier model. In the under-reaction hypothesis, the stocks that have had a strong performance in the past are purchased and the stocks that had a weak performance are sold. To conduct our study, the data of 90 firms that are listed in the Tehran Stock Exchange, during the period of 2001-2010, were analyzed, using the stochastic frontier model. Evidence shows that investors react to the news of accounting earnings less than expected.http://jfm.alzahra.ac.ir/article_959_8e378b7e0ddc951e74db1bfbea19e023.pdfMarket Reaction EfficiencyUnderReactionpostEarnings Announcement Drif |
collection |
DOAJ |
language |
fas |
format |
Article |
sources |
DOAJ |
author |
gholamreza kordestani seideh sepid-dast Reyhaneh larijani |
spellingShingle |
gholamreza kordestani seideh sepid-dast Reyhaneh larijani Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Model راهبرد مدیریت مالی Market Reaction Efficiency Under Reaction post Earnings Announcement Drif |
author_facet |
gholamreza kordestani seideh sepid-dast Reyhaneh larijani |
author_sort |
gholamreza kordestani |
title |
Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Model |
title_short |
Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Model |
title_full |
Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Model |
title_fullStr |
Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Model |
title_full_unstemmed |
Investors' Under-Reaction to Accounting Earnings News Announcements Stochastic Frontier Model |
title_sort |
investors' under-reaction to accounting earnings news announcements stochastic frontier model |
publisher |
Alzahra University |
series |
راهبرد مدیریت مالی |
issn |
2345-3214 2538-1962 |
publishDate |
2013-09-01 |
description |
Capital markets react to various corporate announcements, and one such significant announcement is the accounting earnings announcement. If the market is efficient, stock price is near to fair value. Otherwise, the gap between value and price widens and investors could earn abnormal return. Market reaction to the firm news may be from the type (1) Rapid reaction (information predicted before announcement), (2) Efficient reaction (at time of announcement), and (3) Under-Reaction (after announcement) and (4) Over-Reaction (after announcement). If the market is efficient, stock price nears the fair value. When the market is not efficient, the incorrect investors’ decisions change the stock price less than or more than expected. In this study, the under-reaction of investors is investigated using the stochastic frontier model. In the under-reaction hypothesis, the stocks that have had a strong performance in the past are purchased and the stocks that had a weak performance are sold. To conduct our study, the data of 90 firms that are listed in the Tehran Stock Exchange, during the period of 2001-2010, were analyzed, using the stochastic frontier model. Evidence shows that investors react to the news of accounting earnings less than expected. |
topic |
Market Reaction Efficiency Under Reaction post Earnings Announcement Drif |
url |
http://jfm.alzahra.ac.ir/article_959_8e378b7e0ddc951e74db1bfbea19e023.pdf |
work_keys_str_mv |
AT gholamrezakordestani investorsunderreactiontoaccountingearningsnewsannouncementsstochasticfrontiermodel AT seidehsepiddast investorsunderreactiontoaccountingearningsnewsannouncementsstochasticfrontiermodel AT reyhanehlarijani investorsunderreactiontoaccountingearningsnewsannouncementsstochasticfrontiermodel |
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