How long dose stock price react to earning announcement?

Abstract

This study investigates the number of average day that stock price reacts to earning announcement for the period 1997–2012 data from the SETSMART database. First in this paper, a thorough investigation is done with the help of ‘event study methodology’ to analyze the average number of day that reach the average of maximum cumulative abnormal return and average of minimum cumulative abnormal return after the earning announcement. Second, examines the trend of rate of return of each stock during pre-event period affect to the number of day to reach the average maximum CAR or average minimum CAR of each earning announcement. Third, examines the number of day to reach the average maximum CAR and average minimum CAR of each earning announcement to each industry in SET, which category into 8 industries. Forth, examines that the earning announcement may effect to the investment behavior of each investor types, or not. After the studying, I find that the bad news event reach the minimum CAR in the average faster than the good news event reach the average of maximum CAR. I expected that the study will not only help in developing investors’ awareness regarding stock price sensitivity towards earning announcement, but also help to design their investment decision to protect their interest. However, only earning announcement is the limitation for study as well. So The investor still need to concern and analyst based on other news or information, which will be helped to get more efficiency investment planning.

KEY WORDS: Earning announcement / stock price / EPS / cash dividend / SET