Paper: SSRN 380127

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

Complexity vs Empirical Score

  • Math Complexity: 4.5/10
  • Empirical Rigor: 7.0/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: 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.

Research Flowchart

  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