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The structure of information release and the factor structure of returns

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  • Gilbert, Thomas
  • Hrdlicka, Christopher
  • Kamara, Avraham

Abstract

We model how firms releasing information on different dates causes the CAPM to fail, requiring an additional factor based on the information structure to price assets. We exemplify this mechanism’s empirical relevance using quarterly earnings announcements, which cluster across months along size and book-to-market. Seventy percent of the alpha reduction from including SMB and HML occurs in the four main earnings announcement months. The information structure factor accounts for all of SMB and HML’s seasonal alpha reduction and one third of their overall alpha reduction. Controlling for size and book-to-market, exposures to SMB and HML vary with firms’ earnings announcement month.

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  • Gilbert, Thomas & Hrdlicka, Christopher & Kamara, Avraham, 2018. "The structure of information release and the factor structure of returns," Journal of Financial Economics, Elsevier, vol. 127(3), pages 546-566.
    • Handle: RePEc:eee:jfinec:v:127:y:2018:i:3:p:546-566
    DOI: 10.1016/j.jfineco.2018.01.007
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    More about this item

    Keywords

    Earnings announcements; CAPM; Factor models; SMB; HML;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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