Anomalies and News
45 Pages Posted: 29 May 2016
Date Written: November 23, 2015
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, cross-sectional return predictability, earnings announcements, market efficiency
JEL Classification: G00, G14, L3, C1
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