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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The existence of post-earnings announcement drift of returns in the Nigerian stock market: fact or fiction?
Author:Oludoyi, Samuel BayodeISNI
Periodical:The Nigerian Journal of Economic and Social Studies
Geographic term:Nigeria
Subjects:financial market
Abstract:The extent to which share prices respond to firms' earnings announcements, depends not only on the information contained in the announcements, but also on the extent to which the information is understood. If the information is not fully understood by investors and stock market participants, share prices may not fully adjust to announcements of earnings promptly. The lack of an immediate response to the information contained in earnings announcements may lead to a post-earnings announcement drift in the market. This paper examines the extent to which share prices adjust to earnings announcements in Nigeria's stock market. It uses three earnings expectation models to forecast earnings for one year in advance, viz. the Martingale, subMartingale and Box-Jenkins ARIMA (autoregressive integrated moving average) models. Two sets of data were collected: data on corporate earnings, namely the profit after tax (PAT) of firms included in the study, from 1970 to 1997, and data on firms' share prices, dividends paid and date of payment, as well as trading activities. Data on the Nigerian Stock Exchange index were also collected from January 1986 to December 1998. The paper finds clear evidence of post-earnings announcement drift in the Nigerian stock market. It concludes with policy implications. Bibliogr., note, ref., sum. [ASC Leiden abstract]