IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Adjustment of stock prices to earnings announcements: evidence from Euronext Paris

Listed author(s):
  • Waël Louhichi
Registered author(s):

    Purpose - The aim of this paper is to study both the information content of accounting figures and the speed at which the new information is incorporated into stock prices. Design/methodology/approach - The sample is composed of 117 overnight announcements published by Reuters during the period 2001-2003. For every date, the event is classified into one of three categories: good news, bad news or no news. The paper uses intraday event study methodology to examine market reaction just before and just after the event. Findings - The intraday analysis reveals several results. Firstly, investors react positively to good news and negatively to bad news. Secondly, abnormal returns dissipate within 15?min. Thirdly, prices converge to equilibrium more quickly for good news than for bad news. Fourthly, we present evidence of price reversal 30?min following bad news announcements. Finally, earnings releases are accompanied by a rise in volume which remains even after the equilibrium price is attained. Research limitations/implications - Price discovery is analyzed only in the stock market. It is pertinent to verify if the option market and foreign markets can contribute to the incorporation of new information into stock prices. Practical implications - This work can help investors to determine their trading strategies around earnings announcements. The paper shows that it is not possible to realize trading profits after 15?min following the time of the announcement. Originality/value - The study contributes to both financial accounting and microstructure literature. First, it focuses on the information content of accounting figures using very short horizon (intraday analysis). Second, the paper sheds light on the role of the Euronext preopening period in the incorporation of the overnight information flow.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Emerald Group Publishing in its journal Review of Accounting and Finance.

    Volume (Year): 7 (2008)
    Issue (Month): 1 (February)
    Pages: 102-115

    in new window

    Handle: RePEc:eme:rafpps:v:7:y:2008:i:1:p:102-115
    Contact details of provider: Web page:

    Order Information: Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
    Web: Email:

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eme:rafpps:v:7:y:2008:i:1:p:102-115. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.