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Market Return and Aggregate Earnings News

48 Pages Posted: 14 Mar 2008 Last revised: 18 Mar 2009

William M. Cready

University of Texas at Dallas - Naveen Jindal School of Management

Umit G. Gurun

University of Texas at Dallas

Date Written: 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 Classification: G15, G21

Suggested Citation

Cready, William M. and Gurun, Umit G., Market Return and Aggregate Earnings News (March 1, 2009). Available at SSRN: https://ssrn.com/abstract=1104750 or http://dx.doi.org/10.2139/ssrn.1104750

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

2601 North Floyd Road
Richardson, TX 75083
United States

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