ADJUSTMENT OF STOCK-PRICES TO ANNOUNCEMENTS OF UNANTICIPATED CHANGES IN QUARTERLY EARNINGS

The vast majority of studies relating published accounting statement data with stock price behavior suggest that the data are fully impounded in stock prices prior to or almost instantaneously at time of announcement. For example, in a recent article, Benston states that: "The extant statistical studies that related published accounting statement data with stock prices all lead to the conclusion that the data either are not useful or have been fully impounded in stock prices before they are published" [1973, p. 153]. The present study presents evidence that, over the period studied, the information contained in quarterly earnings was not fully impounded into stock prices at the time of announcement. The adjustment of common stock prices to the announcement of unanticipated changes in quarterly earnings (and to other announcements as well) is an empirical question. The purpose of this present study is to reexamine the adjustment of stock prices to announcements of presumed unanticipated changes in quarterly earnings. We attempt to avoid many of the potential empirical problems of earlier studies,

[1]  Paul A. Griffin,et al.  Time-Series Behavior Of Quarterly Earnings - Preliminary Evidence , 1977 .

[2]  Oldrich A Vasicek,et al.  A NOTE ON USING CROSS‐SECTIONAL INFORMATION IN BAYESIAN ESTIMATION OF SECURITY BETAS , 1973 .

[3]  Alan Kraus,et al.  PRICE IMPACTS OF BLOCK TRADING ON THE NEW YORK STOCK EXCHANGE , 1972 .

[4]  Jack E. Kiger.  An Empirical Investigation of NYSE Volume and Price Reactions to the Announcement of Quarterly Earnings , 1972 .

[5]  Donald L. Tuttle,et al.  Security Analysis and Portfolio Management. , 1971 .

[6]  R. Litzenberger,et al.  QUARTERLY EARNINGS REPORTS AND INTERMEDIATE STOCK PRICE TRENDS , 1970 .

[7]  J. Lorie,et al.  Predictive and Statistical Properties of Insider Trading , 1968, The Journal of Law and Economics.

[8]  M. Osborne,et al.  Market Making and Reversal on the Stock Exchange , 1966 .

[9]  G. Benston.  Required Disclosure and the Stock Market: An Evaluation of the Securities Exchange Act of 1934 , 1973 .

[10]  Myron S. Scholes.  The Market for Securities: Substitution Versus Price Pressure and the Effects of Information on Share Prices , 1972 .

[11]  P. Brown,et al.  The Informational Content of Qtrly Earnings: An Extension and Some Further Evidence , 1972 .

[12]  Robert G. May.  The influence of quarterly earnings announcements on investor decisions as reflected in common stock price changes , 1971 .

[13]  H. Latané,et al.  Quarterly Data, Sort-Rank Routines, and Security Evaluation , 1970 .

[14]  W. Beaver.  The Information Content Of Annual Earnings Announcements , 1968 .

[15]  R. Ball,et al.  An empirical evaluation of accounting income numbers , 1968 .

[16]  W. E. Young.  Common stock ex post holding period returns and portfolio selection , 1968 .