Fearful asymmetry: an analysis of pre-earnings abnormal returns

• Author(s): Amaro, João Tiago Mira Duarte
• Date: 2010
• Persistent ID: http://hdl.handle.net/10362/9906
• Origin: Repositório Institucional da UNL
• Subject(s): Earnings announcements; Abnormal returns; AAR; SAR
• Document Type: Master thesis
• Language: English
• Advisor(s): Santa-Clara, Pedro
• Contributor(s): RUN

Description

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

In this paper we study the returns on a set of different strategies, which are based on the sign and magnitude of the pre-earnings announcement return for a group of US stocks and for some international markets which provides an additional measure of robustness. We also propose a new methodology for the evaluation of abnormal returns. Evidence is found that stocks with negative abnormal returns on the days prior to the earnings announcement have a subsequent higher return on the days following the announcement. A trading strategy based on these findings is then reproduced and its results are analyzed.