Aggregate Market Reaction to Earnings Announcements
58 Pages Posted: 15 Sep 2006 Last revised: 27 Apr 2009
Date Written: April 21, 2009
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: Suggested Citation