Regularities in the equity price response to earnings announcements in Spain
This paper studies the market's reaction to 660 earnings announcements made during the period 1991-95 in Spain. This period starts shortly after the completion of the revision of Spanish financial accounting practices to bring them into line with EC requirements. As expected, we find that the earnings disclosures are accompanied by abnormal volatility; however, we also discover positive abnormal returns and an upward shift in beta. Furthermore, both expected and unexpected changes in earnings have explanatory power for abnormal returns accompanying earnings announcements - although this result is largely driven by the smaller firms in the sample. This evidence is consistent with a change in the risk-return relationship and with unsophisticated investors neglecting value-relevant information.
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Volume (Year): 8 (1999)
Issue (Month): 4 ()
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- Fama, Eugene F & French, Kenneth R, 1992. " The Cross-Section of Expected Stock Returns," Journal of Finance, American Finance Association, vol. 47(2), pages 427-465, June.
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- Gibbons, Michael R., 1982. "Multivariate tests of financial models : A new approach," Journal of Financial Economics, Elsevier, vol. 10(1), pages 3-27, March.
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- Carlos Ocaña & J. Ignacio Peña & Doloros Robles, 1997. "Preliminary Evidence on Takeover Target Returns in Spain: A Note," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(1), pages 145-153.
- Fried, Dov & Givoly, Dan, 1982. "Financial analysts' forecasts of earnings : A better surrogate for market expectations," Journal of Accounting and Economics, Elsevier, vol. 4(2), pages 85-107, October.
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