Are earnings predictable?
Shahram Amini () and
Vijay Singal ()
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Shahram Amini: University of Denver
Vijay Singal: Virginia Tech
Journal of Economics and Finance, 2020, vol. 44, issue 3, No 6, 528-562
Abstract We find that market reactions to earnings announcements can be predictable. Four-factor abnormal returns to earnings announcements that follow buyback announcements are higher by 5.1% than similar returns to earnings announcements that follow equity issues over the (− 1,+ 30) window; the difference is 2.2% when unadjusted returns are used. The magnitude is large and economically and statistically significant. The drift in these returns is unrelated and distinct from the post-earnings announcement drift. For example, we find positive drift for firms making buyback announcements even when they exhibit negative earnings surprises and find negative drift for firms issuing equity even when they show positive earnings surprises. Since the study looks at short periods around earnings announcements, it does not suffer from benchmarking errors that may influence long-horizon returns.
Keywords: Earnings predictability; Buybacks/Repurchases; Equity issues; SEOs; Information asymmetry; Market efficiency (search for similar items in EconPapers)
JEL-codes: G14 G32 G35 (search for similar items in EconPapers)
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