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Earnings announcements by UK companies: evidence of extreme events?

Record type: Article

This paper investigates the abnormal share return dispersion occurring when companies announce their interim or final earnings. Whereas, prior research has focused on abnormal returns, little attention has been given to investigating the dispersion of the abnormal returns. We find strong empirical evidence supporting an abnormal dispersion of share returns on event dates. Moreover, we find that these public announcements are sources of extreme share price movements. Our study provides a step forward in identifying factors underlying the leptokurtosis that is traditionally found in time series stock market returns. Our data sample is comprised of interim and full year results for mid-to-large capitalisation UK companies for the period 1984-2005. Consistent with the extant literature on this subject, we find no evidence of market inefficiency around the event date, or straightforward arbitrage opportunities on the event date. However, we find using Paretian statistics that the abnormal return dispersion on the event date is three times higher than on normal non-event days.

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Citation

Alegria, Carlos, McKenzie, George and Wolfe, Simon (2009) Earnings announcements by UK companies: evidence of extreme events? [in special issue: Selection of Papers From the 4th Conference of the Portuguese Finance Network, 6th-8th July 2006, Porto] European Journal of Finance, 15, (2), pp. 137-156. (doi:10.1080/13518470802466261).

More information

Published date: February 2009
Keywords: event studies, extreme events, abnormal returns, information events, market efficiency
Organisations: Management

Identifiers

Local EPrints ID: 153677
URI: http://eprints.soton.ac.uk/id/eprint/153677
ISSN: 1351-847X
PURE UUID: 98b30350-2de5-4679-858b-1b77db206802

Catalogue record

Date deposited: 20 May 2010 15:54
Last modified: 18 Jul 2017 12:48

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Contributors

Author: Carlos Alegria
Author: George McKenzie
Author: Simon Wolfe

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