2004/10/01 by Richard R. Mendenhall · 395 citations
Business, Management and Accounting · Economics, Econometrics and Finance · #Arbitrage #Auditing, Earnings Management, Governance #Business #Corporate Finance and Governance #Earnings #Earnings response coefficient #Econometrics #Economics #Finance #Financial Markets and Investment Strategies #Financial economics #Monetary economics #Post-earnings-announcement drift
paper · doi:10.1086/422627
published in The Journal of Business 77(4), 875-894 (University of Chicago Press)
openalex publication_date 2004/10/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/03/24
This study examines whether the magnitude of post-earnings-announcement drift is related to the risk faced by arbitrageurs, who may view the anomaly as a trading opportunity. Consistent with this hypothesis, the magnitude of the drift is strongly related to the arbitrage risk measure developed by Wurgler and Zhuravskaya (2002). The effect of arbitrage risk is statistically and economically significant in a range of specifications. The results support the view of post-earnings-announcement drift as an underreaction to earnings information.