Published in:China Accounting and Finance Review, 2020
Extent:
1 Online-Ressource (33 p)
Language:
English
DOI:
10.2139/ssrn.3633394
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 22, 2020 erstellt
Description:
This paper studies the relation between immediate market response to corporate earnings announcements and subsequent stock price movement. By adapting an information signal model from Holthausen and Verrecchia (1988), we develop a new measure — the immediate earnings response coefficient (IERC) — to capture immediate market response. We find that a smaller immediate market reaction to earnings surprise, or a lower IERC, leads to a larger subsequent market response. A trading strategy based on our findings can generate an average abnormal return of 5.21% per quarter