Working Paper: NBER ID: w13090
Authors: Owen Lamont; Andrea Frazzini
Abstract: On average, stock prices rise around scheduled earnings announcement dates. We show that this earnings announcement premium is large, robust, and strongly related to the fact that volume surges around announcement dates. Stocks with high past announcement period volume earn the highest announcement premium, suggesting some common underlying cause for both volume and the premium. We show that high premium stocks experience the highest levels of imputed small investor buying, suggesting that the premium is driven by buying by small investors when the announcement catches their attention.
Keywords: Earnings announcements; Trading volume; Stock prices; Investor behavior
JEL Codes: G11; G12; G14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Earnings announcements (G14) | Stock prices (G19) |
| High trading volume (G15) | Stock price increases around earnings announcements (G14) |
| High past announcement period volume (G14) | Highest announcement premium (G52) |
| Investor behavior (G41) | Price movements (G13) |
| Attention during earnings announcements (G14) | Increased prices (D49) |
| Higher volatility around announcements (G14) | Deterred arbitrage activity (G19) |
| Predictable volume around earnings announcements (G14) | Predictable returns (G17) |