Financial Market Reactions to Earnings Announcements and Earnings Forecast Revisions: Evidence from the U.S. and China

The International Journal of Business and Finance Research, Vol. 4, No. 2, pp. 85-96, 2010

12 Pages Posted: 9 Sep 2010

See all articles by Michael J. Gift

Michael J. Gift

University of Macau

Paul Gift

Pepperdine University, Graziadio School of Business and Management

YeQing Yang

University of Macau

Date Written: 2010

Abstract

This paper examines the impact of earnings announcements and earnings forecast revisions on stock returns across markets with different levels of maturity. In each market, the objects of interest are the effects of backward-looking earnings announcement information and forward-looking earnings forecast information on the price of equity shares. We analyze financial markets in both the U.S. and China in order to see how the level of market maturity and differences in information availability and actual or perceived reliability affect this relationship. We find that forward-looking analyst forecast information plays a significantly larger role in the security pricing process in the more mature U.S. financial market. In the less mature Chinese financial market, we find the opposite relationship as backward-looking earnings announcement information plays a larger role.

Keywords: earnings forecast revisions, earnings announcements, unexpected earnings, security

JEL Classification: D84, G14, G15, O57

Suggested Citation

Gift, Michael J. and Gift, Paul and Yang, YeQing, Financial Market Reactions to Earnings Announcements and Earnings Forecast Revisions: Evidence from the U.S. and China (2010). The International Journal of Business and Finance Research, Vol. 4, No. 2, pp. 85-96, 2010. Available at SSRN: https://ssrn.com/abstract=1667122

Michael J. Gift (Contact Author)

University of Macau ( email )

P.O. Box 3001
Macau

Paul Gift

Pepperdine University, Graziadio School of Business and Management ( email )

6100 Center Drive
Los Angeles, CA 90045
United States

YeQing Yang

University of Macau ( email )

P.O. Box 3001
Macau

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