Full metadata record
| DC Field | Value | Language |
|---|---|---|
| dc.contributor | Faculty of Business | en_US |
| dc.creator | Kong, Kwok Wai | - |
| dc.identifier.uri | https://theses.lib.polyu.edu.hk/handle/200/8454 | - |
| dc.language | English | en_US |
| dc.publisher | Hong Kong Polytechnic University | - |
| dc.rights | All rights reserved | en_US |
| dc.title | Announcement premium : a price-correction-based explanation | en_US |
| dcterms.abstract | Corporate earnings announcements convey important information about the financial health of firms and elicit attention of traders.Current literature reports that stocks on average exhibit positive abnormal returns over short windows around announcement days. This phenomenon is commonly referred to as "announcement premium" and has been studied in numerous frameworks including systemic risk, idiosyncratic risk, market liquidity, attention hypothesis, accounting quality, company characteristics and arbitrage dynamics. However, notwithstanding these extensive efforts, the exact mechanic behind announcement premium is still unknown.In this study, I contribute to the literature by revealing new dynamics of announcement premium within a price-correction-based framework. Contrasting some popular models that attribute the announcement premia to short-lived market irregularities such as temporary shifts in investors' attention to announcing firms or to buy/sell liquidity imbalances, I document evidence that announcement premium is the product of a well-defined price correcting process. Specifically, I provide empirical evidence to support three distinct phases of price progression: (1) investors reacting to announcement uncertainties, stocks trade below fundamental values over pre-announcement periods,(2) in approaching announcement days, undervalued stocks elicit the attentions of informed traders. Arbitrage trades correct stock mispricing and give rise to the phenomenon of announcement premium, and (3) after earnings announcement days, investors face renewed uncertainty and mispricing builds up again. Consistent with this framework, I show that profiles of announcement premia vary predictably according to factors that influence the levels of stock mispricing, including firm size, the pattern of peers'earning releases, the degrees of analyst following, arbitrage constraints and even investor sentiment. In testing my hypotheses I also produce empirical evidence supporting my arguments that announcement premia are products of price corrections near announcement days, while highlighting the shortfalls of friction-based frameworks, which argue that market irregularities generate upward price biases. | en_US |
| dcterms.extent | iii, 100 pages : illustrations ; 30 cm | en_US |
| dcterms.isPartOf | PolyU Electronic Theses | en_US |
| dcterms.issued | 2015 | en_US |
| dcterms.educationalLevel | All Doctorate | en_US |
| dcterms.educationalLevel | D.B.A. | en_US |
| dcterms.LCSH | Hong Kong Polytechnic University -- Dissertations | en_US |
| dcterms.LCSH | Stocks -- Prices | en_US |
| dcterms.LCSH | Stock exchanges. | en_US |
| dcterms.accessRights | restricted access | en_US |
Files in This Item:
| File | Description | Size | Format | |
|---|---|---|---|---|
| b28905568.pdf | For All Users (off-campus access for PolyU Staff & Students only) | 2.38 MB | Adobe PDF | View/Open |
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