Sell on the news, differences of investor opinion, short-sales constraints and returns around earnings announcements: Evidence from the Stock Exchange of Thailand
Keywords:
Short Sale, Earnings Announcements, Investor Opinion, Stock Exchange of ThailandAbstract
Miller’s (1977) hypothesis states that stocks with differences of investor opinion and short-sales constraints are overvalued. We study the effects of differences of investor opinion and short-sales constraints on excess returns around earnings announcement dates using a unique setting from the Stock Exchange of Thailand (SET) which offers distinct short-sales constraints. Our results show that stocks with higher differences of investor opinion have lower excess returns around earnings announcement dates. In addition, we find astronger effect on the stocks that have short-sale constraints. Using the short-sales restriction imposed by the SET, and actual short-sale transaction as the proxies for short-sales constraints, we find that stocks with higher differences of opinion experience even lower returns. Our findings are robust even after controlling for various stock specific variables. This paper provides additional empirical evidence for Miller’s (1997) hypothesis.
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