Questions about earnings announcement

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Questions about Earnings Announcement

a). When examining return reactions to earnings announcements we focused on the earnings surprise. Describe one way to define the earnings surprise.

b). Briefly describe an example of a returns pattern related to earnings announcements consistent with the market reacting too conservatively (underreacting) to information in the earnings surprise.

c). Briefly describe an example of a returns pattern related to earnings announcements consistent with the market overreacting to information in the earnings surprise.

d). In addition to reacting to earnings surprise, stock prices also rise on average around earnings announcement dates, which is documented as earnings announcement premium in the literature. What can be the possible reason(s) for this phenomenon?

Reference no: EM133070013

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