The Evolution of Market Price Efficiency Around Earnings News

36 Pages Posted: 6 Feb 2018 Last revised: 6 Dec 2018

Date Written: November 18, 2018


This paper studies the evolution of market price efficiency around earnings announcements over 40 years. Following earnings surprises, post-earnings announcement drifts are no longer present in the most recent data. Stock prices on announcements gradually become more responsive to earnings surprises over time and this is not explained by a decline in pre-announcement drifts. Results from unbiasedness regressions show that prices on announcements approach martingale (increase in the informational efficiency) and better reflect future prices (increase in informativeness). Significant changes in disclosure on announcements between 2001 and 2005 correspond to a substantial increase in price informativeness. These results have broad implications for firm managers relying on markets to produce price information.

Keywords: earnings announcements, market efficiency, price discovery, price informativeness

JEL Classification: G10, G12, G14

Suggested Citation

Martineau, Charles, The Evolution of Market Price Efficiency Around Earnings News (November 18, 2018). Available at SSRN: or

Charles Martineau (Contact Author)

University of Toronto ( email )

105 St-George
Toronto, Ontario M5S3E6


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