Information Uncertainty and the Post-Earnings-Announcement Drift Anomaly: Insights from REITs

36 Pages Posted: 2 Jul 2010 Last revised: 30 Jan 2012

See all articles by S. McKay Price

S. McKay Price

Lehigh University - Perella Department of Finance

Dean H. Gatzlaff

Florida State University

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law

Multiple version iconThere are 2 versions of this paper

Date Written: August 17, 2010

Abstract

This is the first study to examine the post-earnings-announcement drift anomaly in a Real Estate Investment Trust (REIT) context. The efficient markets hypothesis suggests that unexpected earnings should be fully incorporated into asset prices soon after being publicly announced. We hypothesize that publicly announced earnings signals may be more certain for REITs due to the presence of a parallel (private) asset market, suggesting less drift for REIT stocks. However, we find a large REIT drift component that is both statistically and economically significant. Furthermore, while the initial earnings surprise response is more muted for REITs, we find that the magnitude of the drift is significantly larger for REITs than for ordinary common stocks (NonREITs). Thus, information does not appear to move between the private and public asset markets in such a way as to render REIT earnings signals more certain than NonREIT earnings signals.

Keywords: REITs, Post-Earnings-Announcement Drift, Market Efficiency, Trading Rule, Uncertainty

JEL Classification: D80, G10, G12, G14

Suggested Citation

Price, S. McKay and Gatzlaff, Dean H. and Sirmans, C. F., Information Uncertainty and the Post-Earnings-Announcement Drift Anomaly: Insights from REITs (August 17, 2010). Journal of Real Estate Finance and Economics, Vol. 44, Nos. 1/2, pp. 250-274, 2012, Available at SSRN: https://ssrn.com/abstract=1633542

S. McKay Price (Contact Author)

Lehigh University - Perella Department of Finance ( email )

621 Taylor Street
Bethlehem, PA 18015
United States
610-758-4787 (Phone)

HOME PAGE: http://www.mckayprice.com

Dean H. Gatzlaff

Florida State University ( email )

College of Business, Center for Real Estate
821 Academic Way, Rovetta Business Bldg
Tallahassee, FL 32306-1110
United States
850-644-4071 (Phone)
850-644-4077 (Fax)

C. F. Sirmans

Florida State University - Department of Risk Management, Insurance, Real Estate & Business Law ( email )

Tallahasse, FL 32306
United States
850 644-4076 (Phone)

HOME PAGE: http://www.cob.fsu.edu/rmi

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