Unifying underreaction anomalies

Jackson, A and Johnson, T (2002) Unifying underreaction anomalies. Working Paper. London Business School IFA Working Paper.

Abstract

This paper asks whether momentum and postevent drift are manifestations of the same underlying mechanism or whether they are separate phenomena. We find that both effects can be attributed to persistence in returns following news which affects expected earnings or earnings growth. Holding these quantities fixed, there is no momentum effect, nor is there postevent drift for our sample of events, which includes seasoned equity offerings, repurchases, equityficed mergers, and dividend inititations and omissions.