48 Pages Posted: 14 Mar 2008 Last revised: 18 Mar 2009
Date Written: March 1, 2009
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: Suggested Citation