Stocks Performance around earnings announcements: empirical evidence from the FTSE 100

Bourreau, Charly (2017) Stocks Performance around earnings announcements: empirical evidence from the FTSE 100. [Dissertation (University of Nottingham only)]

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Abstract

This paper investigates the stock price behaviour of FTSE 100 companies around their earnings announcements. The investigation relies on the analysis of the stock price behaviour around 1009 publications. Each time, the influence of the event was analysed during a 75 days’ period. This window includes the seven weeks before and after the announcements as well as the weeks of publication. Both the index adjusted and mean adjusted approaches were followed for each of our event studies. For the purpose of the second approach, the estimation period used was stretched from 1st January 2010 to the 31st December 2015. The average daily compounded returns and standard deviation measures and a simulation of GARCH parameters were calculated for each earnings publication.

This study finds an abnormal behaviour of stock prices around companies’ earnings announcements. The returns observed during event windows are much lower than their normal levels. In fact, they are even found negative. The volatility observations whose go together with it are reported much higher. Furthermore, we find that the most abnormal observations occur during the event weeks where both returns and volatility are respectively at their lowest and highest levels. The further analysis of variables such has the firms’ capitalization and industries, as well as the type of news received at the publication leads to relevant findings. This is especially true when bad news’ is released. Indeed, these findings are accentuated as returns are found at their lowest level and the volatility at its highest. The GARCH parameters analysis provides less satisfactory results. However, their estimation still highlights the abnormality of stock behaviour during our event windows. We find similar parameters for the index and our stocks during the event windows. The main finding stands in the mean adjusted approach which reports the volatility of both the index and its members as being far from their normal level observed during the estimation period. This might be explained by the witnessed changes between both estimation windows of the GARCH parameters.

Item Type: Dissertation (University of Nottingham only)
Depositing User: Bourreau, Charly
Date Deposited: 11 Apr 2018 08:34
Last Modified: 17 Apr 2018 14:36
URI: http://eprints.nottingham.ac.uk/id/eprint/45419

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