Chapter 5. Market Reactions to Earnings Announcements
In the previous chapters, we talked about earnings announcements (Chapter 2) and earnings surprises (Chapters 3 and 4). In this chapter, we begin our overall discussion of stock price reactions to these earnings-related events. In particular, much like Chapter 4, where we presented evidence on the distribution of earnings surprises, in this chapter, we perform similar empirical tests to show you what the distribution of the market reactions to earnings announcements looks like. Our tests in this chapter look at market reactions without considering the direction of the earnings surprise (which we consider in the next chapter). Overall, we find that even in today’s world of information overload, ...
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