The Earnings Announcement Return Cycle

@article{Linnainmaa2019TheEA,
  title={The Earnings Announcement Return Cycle},
  author={Juhani T. Linnainmaa and Conson Zhang},
  journal={USC Marshall School of Business Research Paper Series},
  year={2019}
}
Stocks earn significantly negative abnormal returns before earnings announcements and positive after them. This "earnings announcement return cycle" (EARC) is unrelated to the earnings announcement premium, and it is a feature of stocks widely covered by analysts. Analysts' forecasts follow the same pattern as returns: analysts' forecasts become more optimistic after an earnings announcement and more pessimistic as the next one draws near. We attribute one-half of the earnings announcement… Expand
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