Article1987

FURTHER INSIGHT INTO THE STANDARDIZED UNEXPECTED EARNINGS ANOMALY: SIZE AND SERIAL CORRELATION EFFECTS

Richard J. Rendleman · Charles P. Jones · Henry Allen Latane

87 citations0/0 files storedFinancial Review

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Financial Markets and Investment Strategies Auditing, Earnings Management, Governance Financial Analysis and Corporate Governance

Abstract

ABSTRACT Studying size and serial correlation effects, the authors examine why portfolios selected on the basis of standardized unexpected earnings (SUEs) exhibit excess returns. Results of the study indicate that the SUE effect and the size effect are independent anomalies; however, a more plausible explanation of the SUE effect may involve serial correlation of SUEs. The authors demonstrate that more than half of the post‐announcement responses to current quarter earnings may actually be pre‐announcement adjustments to next quarter's earnings.

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References

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