quarterly earnings releases, expectations, and price behavior
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Quarterly Earnings Releases, Expectations, and Price Behavior. Sam Lim. Set-up. Purpose: to explore the relationship between analyst expectations, quarterly earnings releases, and stock price behavior. - PowerPoint PPT PresentationTRANSCRIPT
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Quarterly Earnings Releases, Expectations, and Price Behavior
Sam Lim
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Set-up Purpose: to explore the relationship between
analyst expectations, quarterly earnings releases, and stock price behavior.
Analyst earnings estimates and actual earnings obtained from Wharton’s WRDS, from the I/B/E/S database.
Release time of quarterly earnings announcement (BMO or AMC) obtained from Earnings.com
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Set-up (continued) HAR-RV Model
RV is annualized
Earnings surprise factor (percentage) ( EPSactual
- EPSestimate ) / EPSactual * 100
Run HAR-RV adding the surprise factor as a regressor. On days of quarterly earnings announcements (the day after, if announcements are made AMC), SURPRISE = surprise factor. Otherwise, SURPRISE = 0.
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Chevron (CVX) Prices sampled every 10 minutes Data from 10/10/2001 to 01/07/2009 (1804
days), 26 quarterly earnings releases (BMO)
RVt+1 Coeff Std. Error P-value
RVt .278 .029 0.000
RVt-5,t .584 .044 0.000
RVt-22,t .073 .034 0.033
SURPRISE -.044 .023 0.062constant .349 .094 0.000
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Chevron (CVX) Split-sign regression – Are the effects of
negative surprises different from positive surprises?
CVX – 12 positive surprises, 13 negative surprisesRVt+1 Coeff Std. Error P-value
RVt .277 .029 0.000
RVt-5,t .583 .044 0.000
RVt-22,t .075 .034 0.029
SURPRISE(+) .010 .038 0.787SURPRISE(-) -.077 .030 0.010constant .338 .094 0.000
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Amazon (AMZN) Prices sampled every 5 minutes Data from 08/01/1997 to 01/07/2009 (2846
days), 42 earnings releases (AMC), 14 positive surprises, 23 negative surprises
Surprise days not properly laggedRVt+1 Coeff Std. Error P-value
RVt .301 .022 0.000
RVt-5,t .302 .038 0.000
RVt-22,t .337 .035 0.000
SURPRISE(+) .024 .022 0.294SURPRISE(-) -.010 .018 0.601constant .749 .218 0.000
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Amazon (AMZN) Surprise days lagged one day to account for
AMC announcements
RVt+1 Coeff Std. Error P-value
RVt .300 .022 0.000
RVt-5,t .302 .038 0.000
RVt-22,t .337 .034 0.000
SURPRISE(+) .027 .022 0.238SURPRISE(-) -.046 .018 0.012constant .749 .218 0.001
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Pepsi (PEP) Prices sampled every 5 minutes Data from 04/09/1997 to 01/07/2009 (2925
days), 66 earnings releases (BMO), 24 positive surprises, 8 negative surprises
RVt+1 Coeff Std. Error P-value
RVt .313 .022 0.000
RVt-5,t .287 .038 0.000
RVt-22,t .315 .035 0.000
SURPRISE(+) .120 .041 0.003SURPRISE(-) -.091 .106 0.390constant .491 .112 0.000
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Chevron (CVX) Overnight returns
ln(price at market open) – ln(price at market close from previous day)
ONReturn Coeff Std. Error P-valueSURPRISE(+) .00019 .00016 0.247SURPRISE(-) .00050 .00015 0.001constant .00031 .00021 0.140
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Chevron (CVX) Intraday Returns
Sum of returns within the day
Increase in volatility not from everyone selling after negative surprises…
Return Coeff Std. Error P-valueSURPRISE(+) .00030 .00027 0.261SURPRISE(-) .00017 .00024 0.473constant .00031 .00021 0.783
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Chevron (CVX) BNS Jump Test (Quad Power, Ratio-max
adjusted) Percentage of Jump days No big difference – lagging has no real results
either volatility increase not from jumps
Though there could be intraday jumps…BNS Z-Score .1% 1% 5%All days 1.94 5.88 14.36Earnings Rel. days 0 3.85 15.38Not ER days 1.91 5.74 14.23
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Amazon (AMZN) Overnight Returns
Intraday Returns
Sign-split regression oddities?
ONReturn Coeff Std. Error P-valueSURPRISE(+) .00062 .00027 0.000SURPRISE(-) .00026 .00024 0.007constant .00000 .00052 0.994
Return Coeff Std. Error P-valueSURPRISE(+) .00027 .00016 0.096SURPRISE(-) -.00004 .00013 0.762constant .00071 .00072 0.319
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Pepsi (PEP) Similar results as Amazon regressions. Regressing overnight returns with surprise –
statistically significant, positive relationship (p-value is nearly 0)
Regressing intraday returns with surprise – statistically insignificant, slightly negative relationship(p-value .15) However, split-sign regression yields positive
relationship significant at 10% level, but only for positive surprises (not stat. sig. for negative surprises)
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Pfizer (PFE) Prices sampled every 5 minutes Data from 04/09/1997 to 01/07/2009 (2923
days), 43 earnings releases (BMO), 31 positive surprises, 6 negative surprises
RVt+1 Coeff Std. Error P-value
RVt .313 .022 0.000
RVt-5,t .287 .038 0.000
RVt-22,t .315 .035 0.000
SURPRISE(+) .120 .041 0.003SURPRISE(-) -.091 .106 0.390constant .491 .112 0.000
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Bank of America (BAC) Prices sampled every 15 minutes Data from 04/09/1997 to 01/07/2009 (2923
days), 42 earnings releases (mostly BMO), 31 positive surprises, 7 negative surprises
RVt+1 Coeff Std. Error P-value
RVt .339 .022 0.000
RVt-5,t .434 .034 0.000
RVt-22,t .174 .027 0.000
SURPRISE(+) .070 .063 0.264SURPRISE(-) -.430 .034 0.000constant .320 .089 0.000
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Further analysis Try Lee-Mykland test for jumps, to see if there are
intraday jumps occurring. Account for dispersion in analyst expectations. Try to find what is the norm/exception (Chevron has
the nicest results, is this the norm or exception?) If Chevron’s results are the norm, how long does this
uncertainty after a earnings surprise last? Incorporate other stock-specific news announcements
to see effect on stock price behavior (similar to Alison Keane’s research on macroeconomic news announcements)
Continuing with the effects of analysts theme, perhaps look at analyst recommendations (buy/hold) and stock behavior.