Title: Is PEAD a consequence of the presence of the cognitive bias of self-attribution in investors' expectations regarding permanent earnings? Evidence from Athens Stock Exchange

Authors: Stavros Degiannakis, George Giannopoulos

Addresses: Department of Economics, Portsmouth Business School, University of Portsmouth, Richmond Building, Portland Street, PO1 3DE, UK. ' Department of Business Administration, Athens University of Economics and Business, 76 Patision Street, GR 104-34, Athens, Greece; Department of Regional Economic Development, University of Central Greece, L. Katsoni Square, GR 32-100, Livadia, Greece

Abstract: The main objective of the paper is to test whether post-earnings announcement drift (PEAD) is a consequence of the presence of self-attribution bias in investors| expectations, regarding permanent earnings. This is the first study to examine empirically this issue, in the sample of Athens Stock Exchange firms. Self-attribution bias implies that the investors respond asymmetrically to confirmations and negations of their prior expectations, regarding permanent earnings, which are based on private information. Confirmations of prior expectations, which are based on private information, lead to increases in investors| confidence in their expectations, regarding permanent earnings. On the other side, negations of prior expectations, which are based on private information, fail to diminish investors| confidence, regarding permanent earnings. The study provides evidence that self-attribution bias does not drive PEAD in Athens Stock Exchange firms.

Keywords: post-earnings announcement drift; PEAD; self-attribution bias; asymmetric response; private information; forecast revision; forecast error; Athens Stock Exchange; earnings announcement; computational economics; Greece; investor expectations; permanent earnings.

DOI: 10.1504/IJCEE.2009.029155

International Journal of Computational Economics and Econometrics, 2009 Vol.1 No.1, pp.89 - 110

Published online: 06 Nov 2009 *

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