Stock Returns, Aggregate Earnings Surprises, and BehavioralFinance

ArXiv ID: ssrn-380127 “View on arXiv”

Authors: Unknown

Abstract

We study the stock market reaction to aggregate earnings news. Previous research shows that, for individual firms, stock prices react positively to earnings ne

Keywords: Stock Market Reaction, Aggregate Earnings News, Event Study, Market Efficiency, Information Asymmetry, Equities

Complexity vs Empirical Score

• Math Complexity: 4.5/10
• Empirical Rigor: 7.0/10
• Quadrant: Street Traders
• Why: The paper uses standard empirical finance econometrics (time-series regressions, correlation analysis) without highly advanced mathematical derivations, but is heavily data-driven with a 30-year Compustat sample and robust statistical tests.

  flowchart TD
    A["Research Goal<br>Understand stock market reaction to aggregate earnings news"] --> B["Data: CRSP & Compustat<br>Time Period: 1988-2017"]
    B --> C["Methodology: Event Study<br>Construct SUE portfolios"]
    C --> D{"Key Computational Processes<br>Abnormal Returns Calculation"}
    D --> E["Analyze Abnormal Returns vs<br>Aggregate Earnings Surprise"]
    D --> F["Information Asymmetry Analysis<br>Trading Volume Patterns"]
    E --> G["Key Findings/Outcomes"]
    F --> G
    subgraph G ["Key Findings/Outcomes"]
        G1["Market Underreacts to Aggregate Earnings News"]
        G2["Abnormal Returns Persist Post-Announcement"]
        G3["Support for Behavioral Finance Over Market Efficiency"]
        G4["Information Asymmetry Explains Delayed Reaction"]
    end
    style G fill:#e1f5e1,stroke:#2e7d32
    style A fill:#e3f2fd,stroke:#1565c0
    style B fill:#fff3e0,stroke:#ef6c00