What Firm-Specific News Releases Drive Economically Significant Stock Returns and Trading Volumes?

36 Pages Posted: 20 Jun 2002  

Paul Ryan

University of London - Faculty of Social Science and Public Policy

Richard Taffler

Manchester Business School

Date Written: March 2002

Abstract

This paper identifies the firm-specific information events that drive economically relevant stock price and trading volume changes. It employs a novel methodology that is not constrained by an arbitrarily determined set of information events and allows for event anticipation and information leakage prior to public disclosure.

We find that no less than 65% of significant price changes and trading volume movements in our sample can be readily explained by public domain information. In addition, we find that a parsimonious set of news categories represent the key drivers.

Sell-side analyst stock recommendations and earnings forecast revisions as a class, unaccompanied by other newsreleases, dominate all other news categories in terms of significant market reaction. They explain 17.4% of major market-adjusted price changes and 16.1% of significant trading volume activity triggered by reported corporate news events. In particular, this compares with 17.0% (15.2%) of economically significant price changes (trading volume movements) driven by firms' formal accounting releases.

However, taking into account the relative magnitude of market response to different news releases, firms' formal accounting disclosures dominate within this domain. As such, we conclude these are not fully anticipated by apparently more timely market disclosures, and that the existence of news services and the activities of the sell-side analyst are not substitutes for a firm's interim and preliminary results.

JEL Classification: G0

Suggested Citation

Ryan, Paul and Taffler, Richard, What Firm-Specific News Releases Drive Economically Significant Stock Returns and Trading Volumes? (March 2002). EFMA 2002 London Meetings. Available at SSRN: https://ssrn.com/abstract=314880 or http://dx.doi.org/10.2139/ssrn.314880

Paul Ryan

University of London - Faculty of Social Science and Public Policy ( email )

London, SE1 9NN
United Kingdom

Richard J. Taffler (Contact Author)

Manchester Business School ( email )

Crawford House
Oxford Road
Manchester M13 9PL
United Kingdom

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