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Market Return and Aggregate Earnings News
William M. Cready University of Texas at Dallas - School of Management Umit G. Gurun University of Texas at Dallas - School of Management March 1, 2009 Abstract: A recent analysis by Kothari, Lewellen and Warner(2006) report negative relations between aggregate earnings surprise and market return in quarterly earnings disclosure and reporting periods and no evidence of a positive relation between aggregate earnings and market return in any post-disclosure quarters. In this analysis we develop approaches aimed at better isolating aggregate earning's news component and find strong evidence of a positive relation between aggregate earnings surprise and return in the quarter following the earnings disclosure quarter. This pattern is consistent with the market not fully incorporating discount rate shock and cash flow implications of aggregate earnings in the disclosure period.
Keywords: Corporate Earnings, Information, Market Efficiency JEL Classifications: G15, G21 Working Paper SeriesDate posted: March 14, 2008 ; Last revised: March 18, 2009Suggested CitationContact Information
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