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Surprise vs anticipated information announcements: Are prices affected differently? An investigation in the context of stock splits

Hwang, S and Keswani, A and Shackleton, M B (2008) Surprise vs anticipated information announcements: Are prices affected differently? An investigation in the context of stock splits. Journal of Banking and Finance, 32 (5). pp. 643-653. ISSN 0378-4266

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Abstract

We compare the long run reaction to anticipated and surprise information announcements using stock splits. Although there is underreaction in both cases, anticipated splits are treated differently to those that are unforeseen. After anticipated splits, cumulative abnormal returns peak at one-and-a-half times the level observed after unanticipated splits although the time taken for the announcement to be absorbed into prices is the same. We explain the difference in underreaction by the degree to which split announcements are believed and hence invested in. The favorable signal conveyed in forecast splits is more credible owing to their better pre-split performance, resulting in a far more pronounced underreaction effect.

Item Type: Article
Journal or Publication Title: Journal of Banking and Finance
Subjects: UNSPECIFIED
Departments: Lancaster University Management School > Accounting & Finance
ID Code: 44923
Deposited By: ep_importer_pure
Deposited On: 11 Jul 2011 19:23
Refereed?: Yes
Published?: Published
Last Modified: 09 Apr 2014 22:26
Identification Number:
URI: http://eprints.lancs.ac.uk/id/eprint/44923

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