Aggregate Market Reaction to Earnings Announcements

58 Pages Posted: 15 Sep 2006 Last revised: 27 Apr 2009

See all articles by Umit Gurun

Umit Gurun

University of Texas at Dallas

William M. Cready

University of Texas at Dallas - Naveen Jindal School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: April 21, 2009

Abstract

This paper identifies a distinct immediate announcement period negative relation between earnings announcement surprises and aggregate market returns. Such a relation implies that market participants use earnings information in forming expectations about expected aggregate discount rates and, specifically, that good earnings news is associated with a positive shock to required returns. We also find some evidence that this negative relation persists well beyond the immediate announcement period, suggesting that market participants do not immediately fully impound these future market return implications of aggregate earnings news.

Keywords: Earnings, Market Efficiency

JEL Classification: G10, M40, M41

Suggested Citation

Gurun, Umit and Cready, William M., Aggregate Market Reaction to Earnings Announcements (April 21, 2009). AAA 2007 Financial Accounting & Reporting Section (FARS) Meeting Paper. Available at SSRN: https://ssrn.com/abstract=930695 or http://dx.doi.org/10.2139/ssrn.930695

Umit Gurun

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

HOME PAGE: http://www.umitgurun.com

William M. Cready (Contact Author)

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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