Asset pricing on earnings announcement days

Kam Fong Chan and Terry Marsh

Journal of Financial Economics, 2022, vol. 144, issue 3, 1022-1042

Abstract: Market betas have a strong and positive relation with average stock returns on a handful of days every year. Such unique days, defined as leading earnings announcement days (LEADs), are times when an aggregate of influential S&P 500 firms disclose quarterly earnings news early in the earnings season. The positive return-to-beta relation holds for various test portfolios, individual stocks, and Treasuries; and is robust to different data frequencies and testing procedures. On days other than LEADs, the beta-return relation is flat. We conclude that waves of early earnings announcements by large firms clustered on LEADs significantly influence asset pricing.

Keywords: Capital asset pricing model; Earnings announcements; Security market line; Market beta (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:144:y:2022:i:3:p:1022-1042

DOI: 10.1016/j.jfineco.2021.06.022

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