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Two Essays on the Post-Earnings-Announcement Drift Anomaly: Information Content and Uncertainty

This dissertation examines the post-earnings-announcement drift in two essays. In the first essay, computer aided content analysis is used to examine the incremental informativeness of quarterly earnings conference calls for earnings announcement window abnormal returns as well as the post-earnings-announcement drift. We find that conference call linguistic tone is a significant predictor of cumulative abnormal returns (CARs) in both the initial reaction and drift windows. Furthermore, conference call tone dominates earnings surprises over the longer period. Holding unexpected earnings constant, portfolios formed based on differences in call tone have CARs that are significantly different from one another. Returns for calls with a highly positive tone and a poor earnings surprise are essentially unaffected by the negative numerical signal, suggesting that new information is coming to light in the conference call discussion. Call tone matters more for dividend paying firms, illustrating differences in investor behavior based on the level of cash flow uncertainty. Additionally, we find that a context specific linguistic dictionary is more powerful than a more widely used general dictionary (Harvard IV-4 Psychosocial). The second essay is the first study to examine the post-earnings-announcement drift anomaly in a Real Estate Investment Trust (REIT) context. The efficient markets hypothesis suggests that unexpected earnings should be fully incorporated into asset prices soon after being publicly announced. We hypothesize that publicly announced earnings signals may be more certain for REITs due to the presence of a parallel (private) asset market, suggesting less drift for REIT stocks. However, we find a large REIT drift component that is both statistically and economically significant. Furthermore, while the initial earnings surprise response is more muted for REITs, we find that the magnitude of the drift is significantly larger for REITs than for ordinary common stocks (NonREITs). Thus, information does not appear to move between the private and public asset markets in such a way as to render REIT earnings signals more certain than NonREIT earnings signals. / A Dissertation submitted to the Department of Finance in partial fulfillment of the
requirements for the degree of Doctor of Philosophy. / Degree Awarded: Summer Semester, 2010. / Date of Defense: April 23, 2010. / Content Analysis, Uncertainty, REITs, Anomaly, Market Efficiency, Post Earnings Announcement Drift / Includes bibliographical references. / David R. Peterson, Professor Directing Dissertation; Clemon F. Sirmans, Committee Member; James S. Doran, Committee Member.

Identiferoai:union.ndltd.org:fsu.edu/oai:fsu.digital.flvc.org:fsu_168588
ContributorsPrice, Steven Mckay (authoraut), Peterson, David R. (professor directing dissertation), Sirmans, Clemon F. (committee member), Doran, James S. (committee member), Department of Finance (degree granting department), Florida State University (degree granting institution)
PublisherFlorida State University
Source SetsFlorida State University
LanguageEnglish, English
Detected LanguageEnglish
TypeText, text
Format1 online resource, computer, application/pdf

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