Market responses to unexpected earnings of
Date
2011-06-10
Authors
Laura Schaffer, Laura Schaffer
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Abstract
The presence of a predictable share price response to a surprise in announced
earnings by listed companies has been documented in US equity markets since
1968. This research investigated whether the presence of a positive or negative
earnings surprise for companies listed on the JSE Securities Exchange resulted
in an equivalent predictable share price response.
The research was conducted on a sample of 112 companies listed on the JSE
Securities Exchange between the period 1 February 2001 and 8 August 2007.
The study analysed share price responses to 946 earnings surprise events over
the three-day trading window around the actual earnings announcement date.
Sell-side analyst earnings forecasts as published on INET Bridge were used as
a proxy for the earnings expected by the market at the time of the company
earnings announcement.
The results of the event study showed a weakly positive share price response to
a positive earnings surprise, the presence of which was not sustained once a
few extreme values were excluded from the sample. The event study results for
negative earnings surprises were more conclusive in showing no predictable
significant share price response.
Description
MBA - WBS
Keywords
Share price movements, Johannesburg Securities Exchange