Microsoft Word - 1001.doc - 337468.pdf
core.ac.uk
Panel A reports asymmetry in the price reaction between good and bad news portfolios for both event windows (-5, +5) and (-1, +1). The bad portfolio shows a higher CAR at (-3.9%) and (-3.2%) for both event windows while a good portfolio exhibits an averages of 1.1% for one window and 1.3% for the ot
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Summary
This document discusses abnormal price and volume reactions around earnings announcements, indicating that these announcements contain valuable information.
Top Highlights
- Panel A reports asymmetry in the price reaction between good and bad news portfolios for both event windows (-5, +5) and (-1, +1). The bad portfolio shows a higher CAR at (-3.9%) and (-3.2%) for both event windows while a good portfolio exhibits an averages of 1.1% for one window and 1.3% for the other windows.
- bnormal price and volume reactions around earnings announcements suggest that these announcements produce highly informative contents
- The magnitude of the cumulative abnormal returns around earnings announcement is induced by trading activity in the two weeks before the release date
- We also show evidence of an increased adverse selection cost around earnings announcement, which is then gradually reduced in the post- announcement period, indicating that earnings announcements reduce uncertainty in the market.
- In general, large investors are more sophisticated and show higher informed trading before earnings announcements whereas smaller investors show stronger reaction to news
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Event Driven
economic
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