ISSN: 1648 - 4460

International Journal of Scholarly Papers


Transformations  in
Business & Economics

Transformations in
Business & Economics

  • © Vilnius University, 2002-2006
  • © Brno University of Technology, 2002-2006
  • © University of Latvia, 2002-2006
The PAD Phenomenon in the UK Capital Market
Eduardas Freitakas, Gerda Žigienė, Arūnas Grigaitis

ABSTRACT. The extensive body of recent finance literature using UK and US data reported an empirical phenomenon that has come to be known as post-earnings-announcement drift (PAD). The PAD phenomenon is characterised by the tendency of abnormal stock returns to be predictable on the basis of past earnings news. This study is conducted to provide additional insight into the PAD phenomenon in the UK. The research design involves the analysis of two earnings surprise measures based on the time-series of earnings and prices. These findings are in support of previous findings for UK and the US. The more detailed analysis conducted of potential explanations for the PAD profits indicates that PAD profits are unlikely to be stipulated by failure to control for market risk. This research also indicates that the PAD arbitrage portfolios returns within market value based sub-samples is unlikely to be explained by the size effect, except the SUE based PAD profit within high market value sub-sample which tend to be almost explained by size effect.

KEYWORDS: post-earnings-announcement drift (PAD) phenomenon, abnormal returns, surprise measures.

JEL classification: G32, G1.

Editorial correspondence:

Scholarly papers Transformations in Business & Economics
Kaunas Faculty
Vilnius University
Muitinės g. 8
Kaunas, LT-44280



Valid XHTML 1.0 Strict