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Earnings Announcements and Systematic Risk

Pavel G. Savor

Temple University - Fox School of Business

Mungo Ivor Wilson

University of Oxford - Said Business School

May 15, 2015

Journal of Finance, Forthcoming
AFA 2012 Chicago Meetings Paper

Firms scheduled to report earnings earn an annualized abnormal return of 9.9%. We propose a risk-based explanation for this phenomenon, in which investors use announcements to revise their expectations for non-announcing firms, but can only do so imperfectly. Consequently, the covariance between firm-specific and market cash-flow news spikes around announcements, making announcers especially risky. Consistent with our hypothesis, announcer returns forecast aggregate earnings. The announcement premium is persistent across stocks, and early (late) announcers earn higher (lower) returns. Non-announcers respond to announcements in a manner consistent with our model, both across time and cross-sectionally. Finally, exposure to announcement risk is priced.

Number of Pages in PDF File: 83

Keywords: Asset Pricing, Risk Premia, Earnings, Announcements

JEL Classification: G12

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Date posted: March 17, 2011 ; Last revised: May 16, 2015

Suggested Citation

Savor, Pavel G. and Wilson, Mungo Ivor, Earnings Announcements and Systematic Risk (May 15, 2015). Journal of Finance, Forthcoming; AFA 2012 Chicago Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1786308 or http://dx.doi.org/10.2139/ssrn.1786308

Contact Information

Pavel G. Savor (Contact Author)
Temple University - Fox School of Business ( email )
Fox School of Business and Management
Philadelphia, PA 19122
United States

Mungo Ivor Wilson
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288914 (Phone)

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