Abstract

http://ssrn.com/abstract=1536894
 
 

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Aggregate Market Reaction to Earnings Announcements


William M. Cready


University of Texas at Dallas - Naveen Jindal School of Management

Umit G. Gurun


University of Texas at Dallas - Naveen Jindal School of Management

January 15, 2010

Journal of Accounting Research, Forthcoming

Abstract:     
This analysis identifies a distinct immediate announcement period negative relation between earnings announcement surprises and aggregate market returns. Such a relation implies that market participants use earnings information in forming expectations about expected aggregate discount rates and, specifically, that good earnings news is associated with a positive shock to required returns. Consistent with this interpretation we find that Treasury bond rates and implied future inflation expectations respond directly to earnings news. We also find some evidence that the negative relation between earnings news and market return persists beyond the immediate announcement period, suggesting that market participants do not immediately fully impound these future market return implications of aggregate earnings news.

Number of Pages in PDF File: 61

Keywords: information content, earnings news, inflation, macro-inefficient market

JEL Classification: G12, G14, M41

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Date posted: January 17, 2010 ; Last revised: January 23, 2010

Suggested Citation

Cready, William M. and Gurun, Umit G., Aggregate Market Reaction to Earnings Announcements (January 15, 2010). Journal of Accounting Research, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1536894

Contact Information

William M. Cready (Contact Author)
University of Texas at Dallas - Naveen Jindal School of Management ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
Umit G. Gurun
University of Texas at Dallas - Naveen Jindal School of Management ( email )
P.O. Box 830688
Richardson, TX 75083-0688
United States
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