Unifying underreaction anomalies

Andrew Jackson, Timothy C Johnson

Research output: Contribution to journalReview article

Abstract

This paper asks whether momentum and postevent drift are manifestations of the same underlying mechanism or are separate phenomena. We find that both effects can be attributed to persistence in returns following news that affects expected earnings or earnings growth. Holding these quantities fixed, there is no momentum effect, nor is there postevent drift for our sample of events, which includes seasoned equity offerings, repurchases, equity-financed mergers, and dividend initiations and omissions. The implication is that return continuation follows fundamental news in general, and in aggregate, this explains momentum.

Original languageEnglish (US)
Pages (from-to)75-114
Number of pages40
JournalJournal of Business
Volume79
Issue number1
DOIs
StatePublished - Jan 1 2006
Externally publishedYes

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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