Post-earnings annoucement drift in Ho Chi Minh Stock exchange (Market Inefficiency Perpective)
Abstract
This thesis is conducted with the aim of studying the post-earnings
announcement drift (PEAD) in Ho Chi Minh Stock Exchange (HOSE) in particular and
in Vietnam context in general as to study the drift in the market of such a typical
developing country. The drift is said to be studied through a typical strategy, so-called
PEAD strategy, in which investors tend to take advantage by simultaneously taking both
LONG position in “good earnings news” portfolio and SHORT position in “bad earnings
news” portfolio. Through the study, it is learnt that under Vietnam’s circumstance, PEAD
strategy can yield an abnormal return of 6.24% over 60 days after the announcement date,
corresponding to an abnormal return of 24.96% on an annualized basis. Based on this
testing result, it can be concluded that PEAD phenomenon possibly exist in Vietnam
securities market. More specifically, the drift may not come from “good earnings news”
portfolio, but from “bad earnings news” for its statistically significant abnormal return of
-8.27% implying an existing cumulative abnormal return for “bad earnings news”
portfolio. An understandable explanation for this occurrence is our restrictions on shortselling in Vietnam. In addition, the drift is also studied in its relation to firm size which
then leads to the fact that post-earnings announcement drift can be seen only among small
firms. Last but not least, in an attempt of explaining the drift’s existence, the market fail
to fully reflect the earnings to the next quarter was considered to be one possibility for its
abnormal return of five days surrounding the next announcement constitutes up to
30.124% as a fraction of 60-day drift.