Subsequent Excess Returns after Loss Warning Announcement in China's Stock Market

26 Pages Posted: 5 May 2002

See all articles by Li Liu

Li Liu

Peking University - Department of Accounting

Zheng Wang

City University of Hong Kong (CityU) - Department of Economics & Finance

Zheng Zhang

Peking University - Department of Applied Economics

Date Written: April 2002

Abstract

The loss warning announcement in China's stock market causes stock price to drop about 3 percent during announcement periods. However, the subsequent medium-term returns after loss warning announcement are significantly positive. For example, cumulative abnormal returns (CARs) from event day 2 to 60 are 7.81%, on average. Previous literature shows that investors may underreact to earnings information (Bernard and Thomas 1989) or overreact to earnings information (DeBondt and Thalor 1985). The return reversal pattern around loss warning announcement supports the overreaction hypothesis, so does the result from cross-sectional regressions.

Keywords: announcement effects, loss warning, underreaction, overreaction

JEL Classification: G14, M41

Suggested Citation

Liu, Li and Wang, Zheng and Zhang, Zheng, Subsequent Excess Returns after Loss Warning Announcement in China's Stock Market (April 2002). Available at SSRN: https://ssrn.com/abstract=308060 or http://dx.doi.org/10.2139/ssrn.308060

Li Liu

Peking University - Department of Accounting

Beijing, 100871
China

Zheng Wang (Contact Author)

City University of Hong Kong (CityU) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Zheng Zhang

Peking University - Department of Applied Economics ( email )

Beijing, 100871
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
365
Abstract Views
2,723
rank
120,925
PlumX Metrics