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The price momentum and discounting effects on stock prices after earnings announcements: an empirical analysis

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  • Brian Truong
  • Dang T. Tran

Abstract

The purpose of this study is to test price momentum and the discounting effects on the stock prices of a firm immediately after its quarterly earnings announcement. The approach is holistic and cross-sectional. The model consists of a series of regressions in which the dependent variables were of several differing durations of price reaction periods and the explanatory variables account for timing effects, price momentum, market co-movement, earnings forecast, analyst effects, forecast revisions, earnings surprises and sectoral differences. There is evidence that points to mid- and long-term momentum that extend a day or two after the earnings release. After that point, there seems to be a net discounting effect. That is, there is evidence of an inverse relationship between the price change prior to the earnings announcement and the price change after the earnings announcement.

Suggested Citation

  • Brian Truong & Dang T. Tran, 2014. "The price momentum and discounting effects on stock prices after earnings announcements: an empirical analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 21(6), pages 417-420, April.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:6:p:417-420
    DOI: 10.1080/13504851.2013.864024
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