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Event Study: The Rising Impact Of Earnings On Stock Returns
Seong Lee
edited Mar 30, 2016
Using Data Show Q

A study published in 2015 by two Stanford professors documented the rising impact that earnings announcements have on stock prices. The study encompassed every firm on the three major exchanges from 1971 to 2011 and analyzed returns following an earnings call. They found that earnings reports have a large impact on investor decisions and that impact has been rising at a growing rate since 2001.

"When they applied this approach to their sample of 700,000 quarterly earnings reports from 1971 through 2011, they found that price revisions were much larger in the days surrounding an announcement than at other times." This also meant that stock price volatility during announcement periods were much higher than non-announcement periods and that gap was growing.

The study states, "We find the variability of returns at earnings announcements has continued to rise, and that the rate of the increase is substantially greater than in earlier years."

The goal for this notebook was to expand upon the findings and see if the same trend upheld from 2011 - 2015 (the study stopped at 2011).

Summary

Are the results here similar to what you've seen in your backtesting? Comment below with your thoughts or feel free to shoot me a mail at [email protected].

For an in-depth webinar on earnings announcements. Watch our webinar with Dr. Jess Stauth, Quantopian's VP of Quant Strategy, and Anju Marempudi, CEO of EventVestor.

For questions on accessing this data, please email [email protected]

Thanks and feedback is always appreciated.

Disclaimer

The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.

2 responses
Seong Lee
Feb 8, 2016

The notebook has been updated to use the dates available in the sample version (up till the beginning of 2014).

Seong Lee
Mar 23, 2016

A few folks have been asking for an updated version of this study.

Here's the results of the notebook run till 2015 using the full, premium version of the Earnings Calendar. The full version is available for $5/mo.

In 2014 and 2015, volatility around earnings and average volatility seem to have risen.

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.