Earnings Surprises and the Market Reaction to Earnings Announcements by Takeover Targets PDF Download

Author: Cintia M. Easterwood
Publisher:
ISBN:
Category : Consolidation and merger of corporations
Languages : en
Pages : 30

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Author: Marie Ellen Emmendorfer Archambault
Publisher:
ISBN:
Category : Consolidation and merger of corporations
Languages : en
Pages : 296

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Author: Runeet Kishore
Publisher:
ISBN:
Category :
Languages : en
Pages : 37

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We study the drift in returns of portfolios formed on the basis of the stock price reaction around earnings announcements. The Earnings Announcement Return (EAR) captures the market reaction to unexpected information contained in the company's earnings release. Besides the actual earnings news, this includes unexpected information about sales, margins, investment, and other less tangible information communicated round the earnings announcement. A strategy that buys and sells companies sorted on EAR produces an average abnormal return of 7.55% per year, 1.3%more than a strategy based on the traditional measure of earnings surprise, SUE. The post earnings announcement drift for EAR strategy is stronger than post earnings announcement drift for SUE. More importantly, unlike SUE, the EAR strategy returns do not show a reversal after 3 quarters. The EAR and SUE strategies appear to be independent of each other. A strategy that exploits both pieces of information generates abnormal returns of about 12.5% on an annual basis.

Author: Benjamin Schmitt
Publisher:
ISBN: 9783656972426
Category :
Languages : en
Pages : 56

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Bachelor Thesis from the year 2008 in the subject Business economics - Investment and Finance, grade: 1.1, EBS European Business School gGmbH (Finance), language: English, abstract: Many authors have already studied about stock price reactions after earnings announcements yet, which is because of the importance of earnings announcements, in particular quarterly earnings announcements, for many investors. However, all major studies concerning this topic deal with long-term scenarios, the stock's price performance is measured for a time period of at least three quarters. Due to the fact that there are many investors, especially institutional investors such as hedge funds that trade stocks much more frequently, the existing studies are not relevant for them. This paper studies stock price reactions around quarterly earnings announcements for companies listed in Deutscher Aktienindex (DAX) or Midcap DAX (MDAX) with respect to changes of the company's full-year outlook and of earnings surprise regarding analyst consensus forecast within ten days before and after the announcement date. Hence, this paper aims to analyse short-term reaction to quarterly earnings announcements, which are of relevance for all investors, whose investment strategy is, at least partially, focussing on the short-term performance. The main target group of this analysis are therefore hedge funds and investors that run short-term strategies. Due to the fact that the widespread Event Study Methodology is focused on the long-term, it is irrelevant for this analysis.

Author: Ki Choong Han
Publisher:
ISBN:
Category : Corporate profits
Languages : en
Pages : 318

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Author: John Shon
Publisher: Pearson Education India
ISBN: 9788131765470
Category :
Languages : en
Pages : 228

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Author: Qi Sun
Publisher:
ISBN:
Category :
Languages : en
Pages : 16

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This study investigates whether the timing of earnings announcement in earnings season affects stock price discovery process. This paper documents that market reaction is more favorable for earnings announcements made at the beginning of earnings season (“timing effect”). Price reaction on earnings announcement dates and post-announcement price drift are significantly stronger for positive earnings surprises released at the beginning of earnings season. Negative earnings surprises announced at the end of earnings season have the most pronounced post-announcement price decline. The timing effect associated with positive earnings surprises is consistent with industry information transfer theory. The timing effect associated with negative earnings surprise is mainly driven by market penalty on companies' strategic delay of bad news announcements.

Author: VICTOR L. BERNARD
Publisher:
ISBN:
Category :
Languages : en
Pages : 44

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Author: DOUGLAS J. SKINNER
Publisher:
ISBN:
Category :
Languages : en
Pages : 40

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Author: Gia Chevis
Publisher:
ISBN:
Category :
Languages : en
Pages : 50

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We measure the market's assessment of the information in a particular earnings surprise by calculating a firm- and time-specific earnings response coefficient (FTERC). We use the FTERC to infer the market's expectation of the persistence of unexpected earnings and also develop an interpretive framework. Examining the market's response to a particular earnings surprise - rather than whether it, on average, over- or underreacts - allows researchers to use the FTERC as a dependent variable (e.g. in a study of disclosure quality) or as a control when each response is unique (e.g. a firm before, during and after fraud). Our model implies seven classifications of expected persistence: growing, permanent, decaying, transitory, partially offsetting, offsetting, and subsuming. We find that approximately 1 in 4 earnings announcements results in an FTERC within the 'normal' permanent-to-transitory range; over 70% of expectation revisions are growing or subsuming.