The Impact of Firm-Specific News Like Quarterly Earnings Announcements on Stock Beta
Author | : Sitangshu Khatua |
Publisher | : |
Total Pages | : |
Release | : 2015 |
ISBN-10 | : OCLC:1306308509 |
ISBN-13 | : |
Rating | : 4/5 (09 Downloads) |
Book excerpt: Stock market overreacts to both anticipated and unanticipated stock-specific news. In spite of any firm-specific news, evidences of extreme price changes have been observed in the stock market. Significant abnormal returns are found in the opposite direction indicating the existence of an overreaction effect. It is also found that the magnitude of reversal is inversely proportional to the event-period stock returns. The overreaction effect continues only about two days after the event date for this present sample. Thus, the ultimate understanding of overreaction effects in preparing trading strategies will perk up investors' returns. Changes in beta are found more statistically significant where the most learning is possible, like in the case of more earnings surprise (good or bad news), smaller firms, higher amount of volatility or uncertainty, or announcements that come early rather than late in the announcement season.