Asset pricing on earnings announcement days

Kam Chan, Terry Marsh

Research output: Contribution to journalArticle

Abstract

Market betas have a strong and positive relation with average stock returns on a handful of days every year. Such unique days, defined as leading earnings announcement days (LEADs), are times when an aggregate of influential S&P 500 firms disclose quarterly earnings news early in the earnings season. The positive return-to-beta relation holds for various test portfolios, individual stocks, and Treasuries; and is robust to different data frequencies and testing procedures. On days other than LEADs, the beta-return relation is flat. We conclude that waves of early earnings announcements by large firms clustered on LEADs significantly influence asset pricing.
Original languageEnglish
JournalJournal of Financial Economics
DOIs
Publication statusE-pub ahead of print - 23 Jun 2021

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