Overnight earnings announcements and preopening price discovery

Xijuan Xiao and Ryuichi Yamamoto

Japan and the World Economy, 2024, vol. 70, issue C

Abstract: This study examines the market responses to announcements of stocks with different trading activities that disclose earnings during and outside normal trading hours. For less actively traded stocks, when bad news is reported after the market closes, potential informed trading exists, along with heightened return reversals and market inefficiency before the release. These informed trading activities are partially responsible for the post-announcement preopening price adjustments. Although the after-release preopening period for inactive stocks does not significantly facilitate price discovery as much as for active stocks, it provides an environment to resolve order imbalances after overnight information.

Keywords: Earnings announcement; Overnight information; Informed trading; Preopening price discovery (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:70:y:2024:i:c:s0922142524000124

DOI: 10.1016/j.japwor.2024.101249

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