Investor reaction to simultaneous news releases: unemployment vs. earnings

Neeraj J. Gupta (), Vitaliy Strohush () and Reilly White ()
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Neeraj J. Gupta: Elon University
Vitaliy Strohush: Elon University

Journal of Economics and Finance, 2019, vol. 43, issue 4, No 5, 735-749

Abstract: Abstract We examine the stock price reaction to surprises in the simultaneous releases of two types of news: macro news (captured by unemployment announcements) and corporate news (captured through earnings releases). Using financial data for the U.S. markets from 1962 to 2012, we confirm that earnings surprises and unemployment surprises significantly affect individual stock returns. Also, in line with Boyd et al. (J Bank Financ 60(2):649–672, 2005), we confirm that both surprises are significant during economic booms and contractions. However, while unemployment surprises are significant on a stand-alone basis, they are systematic events whose impact is captured within systematic risk-adjusted return models such as the Fama-French 3-factor and market models. This suggests that, for individual stocks, earnings surprises dominate unemployment surprises when dealing with simultaneous news releases. The stock market reaction to firm earnings surprises is enhanced during recessions, which can mostly be explained by systemic market functions.

Keywords: Unemployment; Earnings; Surprises; Forecasts (search for similar items in EconPapers)
JEL-codes: E24 E44 G11 G14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1007/s12197-018-9460-z

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