Sleepy Markets and the Post-Earnings-Announcement Drift – A Study on the Nordic Stock Markets during 2014–2022

Abstract

This study presents results on the phenomenon of post earnings announcement drift (PEAD) in the Nordic countries during January 2014 to December 2022, regarding its existence and the possibility of successfully building a long-short trading strategy. Although the phenomenon has been extensively researched in international markets, the Nordic countries as a whole has interestingly enough not been thoroughly examined. The results indicate that the drift e↵ect is evident in the evaluated sample of the companies listed on the Nordic stock markets through holding periods of 3, 6, and 12 months following the announcement date. Excess return is surprisingly found in both the LONG and SHORT positions throughout all time-periods, however a HEDGE position holding the return spread of the LONG and SHORT positions did not generate abnormal returns. Utilizing the three-factor model of Fama and French (1993) controlling for risk-factors finds that returns are robust to risk- factors on the shorter time frames, but can partly be explained by the value factor on the 12 month time frame.