Document Type : Original Article
Authors
1
Department of Finance & Risk Management, Faculty of Economics, Management, and Financial Science, Khatam University, Tehran, Iran
2
Department of Finance and Risk Management, Faculty of Management and Finance, Khatam University, Tehran, Iran
Abstract
Introduction: This study empirically examines how retail-investor order flow and limited investor attention are related to price anomalies on the Tehran Stock Exchange (TSE), with particular emphasis on the momentum effect and Post-Earnings-Announcement Drift (PEAD). Specifically, it asks whether retail investors trade against past returns and earnings news, and whether investor attention is associated with retail order flow beyond the content of the news itself.
Methods: This applied study uses a descriptive-correlational, ex post facto design. Earnings surprises are measured as the deviation of realized earnings from analyst consensus forecasts scaled by price, and a time-series surprise is used as a robustness check. The sample comprises 55 TSE-listed firms from 2020 to 2025 (Farvardin 1399 to Azar 1404 in the Iranian calendar), with 70,478 firm-day observations (56,618 in the estimation sample data) and 275 annual earnings announcements. Retail and institutional trade data, CODAL disclosures and consensus reports are combined. The hypotheses are tested with portfolio sorts, an event study and panel regressions, and statistical inference is checked with day fixed effects, two-way clustering, Driscoll–Kraay and Fama–MacBeth standard errors.
Findings: The momentum strategy earns a significant monthly premium of about 1.86%. Retail investors are significant net buyers of past losers and significant net sellers of the intermediate portfolios P3 and P4, while their net flow in past winners is close to zero, a pattern consistent with contrarian trading; however, the negative association between past returns and retail flow in regressions is weak and disappears once common daily shocks are controlled for. The contrarian gap is statistically significant only after high-intensity earnings news. With market-adjusted returns and the consensus-based surprise, no significant drift is found over 20 trading days, although the test cannot rule out moderate effects; with a time-series surprise, a 40- to 60-day drift in the direction of the news emerges that is significant with firm clustering but not robust to the cross-sectional correlation of clustered events. High abnormal trading volume is strongly and robustly associated with net retail buying, whereas its interaction with the earnings surprise is not significant in the full sample and only suggestive within the announcement window.
Conclusions: The evidence is consistent with contrarian retail buying of losing stocks and with a strong association between attention and retail buying, but it does not support a moderating role of attention in the full sample. Evidence of PEAD depends on the surprise measure and the inference method and weakens once returns are adjusted for market movements, suggesting that part of the drift measured with raw returns may reflect market-wide trends. Because the design is observational, the results describe associations rather than causal effects.
Keywords: Retail Investors; Post-Earnings Announcement Drift (PEAD); Contrarian Behavior; Investor Attention; Consensus Analyst Forecasts; Momentum
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