Abnormal Returns

1) Abnormal returns to investment strategies based on the timing of earnings reports

Stephen H. Penman*

University of California, Berkeley, Berkeley, CA 94720, USA

Available online 25 November 2002. 

Abstract

This paper adds to recent evidence on market inefficiency in processing information in earnings reports. It documents that short positions taken in sample stocks which did not report earnings by the date expected during the sample period, 1971–1976, would have been abnormally profitable, before transaction costs. This is because late reports, on average, revealed bad news which was not anticipated in market prices prior to the report date. The magnitude of the average abnormal returns is in the order of 1.0% over 20 days but is larger for smaller firms in the sample and positively related to the length of the reporting delay. The paper also documents that long positions taken in stocks reporting early with good news would have generated abnormal returns of approximately 1.0% on average over a 20-day holding period.

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http://econpapers.repec.org/article/eeejaecon/v_3a6_3ay_3a1984_3ai_3a3_3ap_3a165-183.htm

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2) The Credit Default Swap Market’s Reaction to Earnings Announcements

by Caitlin Ann Greatrex

Discussion Paper No: 2008-06

March 2008

Department of Economics

Fordham University

441 E Fordham Rd, Dealy Hall

Bronx, NY 10458

(718) 817-4048

This paper examines the efficiency of the CDS market by conducting a comparative

event study in which both the CDS and the stock markets‟ responses to earnings

announcements are considered. I find that both markets have statistically significant

reactions to earnings announcements and both markets anticipate these informational

events up to 90 trading days prior to announcement. I further find that neither markets‟

reaction to earnings announcements is...