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Anomalies and News

60 Pages Posted: 17 Jul 2015 Last revised: 22 Mar 2017

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management

R. David McLean

Georgetown University - Department of Finance

Jeffrey Pontiff

Boston College - Department of Finance

Date Written: November 23, 2015

Abstract

Using a sample of 97 stock return anomalies documented in published studies, we find that anomaly returns are 7 times higher on earnings announcement days and 2 times higher on corporate news days. The effects are similar on both the long and short sides, and they survive adjustments for risk exposure and data mining. Moreover, anomaly signals predict errors in analysts’ earnings forecasts — analysts’ forecasts are systematically too low for anomaly-longs and too high for anomaly-shorts. Taken together, our results support the view that anomaly returns are the result of biased expectations, which are at least partially corrected upon news arrival.

Keywords: News, Anomalies, Cross-sectional return predictability, earnings announcements, market efficiency

JEL Classification: G00, G14, L3, C1

Suggested Citation

Engelberg, Joseph and McLean, R. David and Pontiff, Jeffrey, Anomalies and News (November 23, 2015). 6th Miami Behavioral Finance Conference. Available at SSRN: https://ssrn.com/abstract=2631228 or http://dx.doi.org/10.2139/ssrn.2631228

Joseph Engelberg

University of California, San Diego (UCSD) - Rady School of Management ( email )

9500 Gilman Drive
Rady School of Management
La Jolla, CA 92093
United States

R. David McLean

Georgetown University - Department of Finance ( email )

3700 O Street, NW
Washington, DC Washington DC 20057
United States

Jeffrey Pontiff (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

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