The Earnings Announcement Return CycleSpeaker

Finance Webinar（2021-24)

Topic:  The Earnings Announcement Return Cycle

Speaker: Yingguang Zhang, Peking University

Time: Friday, June 4, 12:00–1:00 p.m. Beijing Time

Location: Room K01, Guanghua Building 2; You are also welcome to join online via Microsoft Teams

Abstract:

Stocks earn negative abnormal returns before earnings announcements and positive after them. Analysts' forecasts, recommendations, and target prices follow the same pattern: analysts become more optimistic after earnings announcements and pessimistic as the next ones draw near. Consistent with analysts contributing to the mispricing, contrarian anomalies display the same cycle. Strategies that trade against these anomalies after earnings announcements and for them before the next one earn as large alphas as the anomalies---despite being unconditionally anomaly neutral. We disentangle the effects of analysts and firm disclosures, and find that analysts' optimism appears to drive the high premium after earnings announcements and firms' disclosures of bad news drive the low premium before the next ones.

Your participation is warmly welcomed!