Investor sophistication and patterns in stock returns after earnings announcements

• 成果类型: Article
• 署名作者: Bartov, E; Radhakrishnan, S; Krinsky, I
• 署名单位: New York University; University of Texas System; University of Texas Dallas; McMaster University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr.2000.75.1.43
• 发表日期: 2000
• 页码: 43-63
• 关键词: time-series models; INSTITUTIONAL OWNERSHIP; ACCOUNTING EARNINGS; quarterly earnings; FUTURE EARNINGS; INFORMATION; MARKET; prices; perceptions; volume

摘要

This study tests whether the observed patterns in stock returns after quarterly earnings announcements are related to the proportion of firm shares held by institutional investors, a variable used by prior research to proxy for investor sophistication. Our findings show that the institutional holdings variable is negatively correlated with the observed post-announcement abnormal returns. Our findings also show that traditional proxies for transaction costs (i.e., trading volume, stock price) as well as firm size have little incremental power to explain post-announcement abnormal returns when institutional holdings is an explanatory variable. If institutional ownership is a valid proxy for investor sophistication, these findings suggest that the trading activity of unsophisticated investors underlies the predictability of stock returns after earnings announcements. However, tests evaluating the validity of institutional holdings as a proxy for investor sophistication yield only mixed results. This calls for caution in interpreting our findings.