Event Day 0? After-Hours Earnings Announcements

39 Pages Posted: 23 Jun 2005

See all articles by Henk Berkman

Henk Berkman

University of Auckland - Business School

Cameron Truong

Monash University; Financial Research Network (FIRN)

Date Written: January 2006

Abstract

Over the last 2 decades after-hours earnings announcements have become more prevalent, resulting in a shift in earnings-related price changes from the announcement date to the next trading day. We highlight three aspects relevant for event studies around earnings announcements. First, daily price changes and volume are significantly biased if event dates are not adjusted for after-hours announcements. Second, correct measurement of event day 0 significantly increases the power to detect abnormal returns Third, if event dates can not be adjusted for after-hours announcements, earnings announcement windows should include the day after the announcement (event day +1) to ensure price changes and volume in reaction to after-hours announcements are included. Furthermore, if event dates are not adjusted, the post-earnings announcement drift should not include the return on event day +1.

Keywords: Event studies, earnings announcements, Compustat

JEL Classification: G14, M41

Suggested Citation

Berkman, Henk and Truong, Cameron, Event Day 0? After-Hours Earnings Announcements (January 2006). Available at SSRN: https://ssrn.com/abstract=747004 or http://dx.doi.org/10.2139/ssrn.747004

Henk Berkman (Contact Author)

University of Auckland - Business School ( email )

Private Bag 92019
Room: 577
Auckland
New Zealand
(64 9) 3737599 Ext. 7181 (Phone)
(64 9) 3737406 (Fax)

Cameron Truong

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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