Warp Speed Price Moves: Jumps after Earnings Announcements

Kim Christensen, Allan Timmermann and Bezirgen Veliyev

No 18032, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Corporate earnings announcements unpack large bundles of information that should, if markets are efficient, almost surely trigger jumps in stock prices immediately after the news release. Testing this implication is difficult in practice because most earnings announcements occur in the after-hours market where prices are contaminated by high levels of microstructure noise. We develop a new noise-robust jump test statistic and demonstrate that stock prices almost always jump immediately after earnings announcements. Finally, we develop a trading-based approach that allows us to estimate exactly how long it takes for markets to incorporate earnings news and quantify the importance of transaction costs.

JEL-codes: C10 (search for similar items in EconPapers)
Date: 2023-03
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