How the Equity Market Responds to Unanticipated Events

Raymond M. Brooks, Ajay Patel and Tie Su
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Raymond M. Brooks: Oregon State University
Ajay Patel: Wake Forest University
Tie Su: University of Miami

The Journal of Business, 2003, vol. 76, issue 1, 109-134

Abstract: We examine the market reaction of prices, volume, spreads, and trading location when firms experience events that are totally unanticipated by the equity market in terms of both timing and content. We find that the response time is longer than previous studies have reported. Selling pressure, wider spreads, and higher volume remain significant for over an hour. We also find an immediate price reaction for overnight events; however, the market takes longer to react to events that occur when it is open. These findings may shed light on the efficacy of trading halts.

Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:76:y:2003:i:1:p:109-134

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