ACTIVE AND PASSIVE OWNERSHIP’S IMPACT ON POST EARNINGS ANNOUNCEMENT DRIFT

Open Access
Author:
Cronauer, Ryan Joseph
Area of Honors:
Finance
Degree:
Bachelor of Science
Document Type:
Thesis
Thesis Supervisors:
  • Jeremiah Green , Thesis Supervisor
  • Brian Davis, Honors Advisor
Keywords:
  • PEAD
  • Active
  • Passive
  • Ownership
  • Post
  • earnings
  • announcement
  • drift
  • efficient
  • market
  • hypothesis
  • EMH
Abstract:
The solution as to why Post Earnings Announcement Drift (PEAD) occurs has eluded academic experts in the field for almost fifty years. Furthermore, because it conflicts with the widely accepted Efficient Market Hypothesis (EMH), it has drawn a great deal of attention. Due to the longevity of its mystery as well as the controversy it causes as a counterargument to EMH, PEAD has become one of the most interesting and researched financial topics of all time. Previous research has narrowed down the list of possibilities for the potential cause of this phenomenon and this work will add to the literature by examining a logical possibility, ownership style. This study will compare Post Earnings Announcement Drift in firms that are owned mostly by active investors against those who are more largely owned by passive investors. This would imply a lack of attention, trading, and liquidity as the root cause of PEAD.