Post-earnings annoucement drift in Ho Chi Minh Stock exchange (Market Inefficiency Perpective)
Vy, Le Dong Thao
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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.