How is Earnings News Transmitted to Stock Prices?

• 成果类型: Article
• 署名作者: Gregoire, Vincent; Martineau, Charles
• 署名单位: Universite de Montreal; HEC Montreal; University of Toronto; University Toronto Scarborough
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12394
• 发表日期: 2022
• 页码: 261-297
• 关键词: information-content; transaction costs; MARKET; liquidity; announcements; DISCOVERY; analysts; adjustment; auctions; IMPACT

摘要

We examine the speed and mechanism of the price discovery process following earnings announcements in the after-hours market, a very illiquid trading environment. Prices reflect earnings surprises mostly through changes in quotes rather than through trades. Following positive announcement surprises, ask prices adjust quickly while bid prices are slower to adjust, and vice versa for negative surprises. Returns computed from trade prices underestimate the speed and magnitude of price reactions following announcements relative to returns computed from quotes. These findings emphasize the importance of using quotes and not trade prices when examining intraday price discovery. Because firm announcements such as earnings generally occur in the after-hours market, using quotes is crucial as trading is sparse. We further illustrate the importance of quotes when examining the price discovery process around analyst recommendation revisions.