Anomalous Stock Returns Around Internet Firms' Earnings Announcements

41 Pages Posted: 28 Apr 2001

See all articles by Brett Trueman

Brett Trueman

University of California, Los Angeles (UCLA) - Anderson School of Management

M.H. Franco Wong

University of Toronto - Rotman School of Management

Xiao-Jun Zhang

University of California, Berkeley - Accounting Group; China Academy of Financial Research (CAFR)

Multiple version iconThere are 2 versions of this paper

Date Written: April 2001

Abstract

This paper presents evidence of persistent anomalies in internet firms' stock returns surrounding their quarterly earnings announcements. There is a general run-up in prices in the days prior to the earnings announcement, which extends through the market opening on the day subsequent to the release. This is followed by a price reversal lasting for several days. The magnitude of the market-adjusted returns associated with these price movements exceeds 11 percent over a 10-day period. There is little evidence to suggest that these returns can be explained either by the earnings news disclosed or by changes in risk around the earnings announcements. Additional analyses suggest that these return patterns are driven, at least in part, by price pressure which exists in the days before internet firms' earnings announcements. A trading strategy designed to exploit these price patterns would have generated a daily return of more than 1 percent over the sample period.

JEL Classification: M41, G14

Suggested Citation

Trueman, Brett and Wong, M.H. Franco and Zhang, Xiao-Jun, Anomalous Stock Returns Around Internet Firms' Earnings Announcements (April 2001). JAE Boston Conference June 2001. Available at SSRN: https://ssrn.com/abstract=268349 or http://dx.doi.org/10.2139/ssrn.268349

Brett Trueman (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States
310-825-4720 (Phone)
310-267-2193 (Fax)

M.H. Franco Wong

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-0729 (Phone)

HOME PAGE: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Wong.aspx

Xiao-Jun Zhang

University of California, Berkeley - Accounting Group ( email )

545 Student Services Building
SPC 1900
Berkeley, CA 94720
United States
(510) 642-4789 (Phone)
(510) 642-4700 (Fax)

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

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