An Examination of the Market Reaction to Pre-open Versus Post-close Earnings Announcements
67 Pages Posted: 6 Nov 2017 Last revised: 26 Dec 2023
Date Written: July 19, 2021
Approximately 95 percent of publicly traded firms announce earnings outside of regular trading hours, either in the pre-open (between midnight and the opening bell) or in the post-close (between the closing bell and midnight). We examine whether the timing of earnings announcements in the pre-open versus post-close affects how quickly earnings news is incorporated into prices. We find that earnings announcements in the pre-open are associated with a slower stock market response to the earnings news relative to earnings announcements in the post-close. This relatively delayed response lasts for multiple trading days following the earnings announcement, but is most pronounced during the first trading session following the announcement. The relatively delayed response to post-close announcements cannot be explained by various determinants of pre-open versus post-close earnings announcements, the earnings news, or differential awareness/acquisition of earnings announcement information. The results suggest that the delayed response to pre-open announcements relative to post-close announcements is largely attributable to the longer time period that post-close announcements provide for investors to process the earnings news prior to the market open. Collectively, our results suggest that the timing of earnings announcements relative to the open of trading impacts the speed of equity investors' response to earnings news.
Keywords: Earnings Response Coefficient, Volatility, Earnings Announcements, Disclosure Timing
JEL Classification: G12, G14, G17
Suggested Citation: Suggested Citation