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On the Possibility of Arbitrage Around Announcements

In: Business Analytics Progress on Applications in Asia Pacific

Author

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  • Karthik Narayan Pasupathy

Abstract

This paper aims to look at stock price movements around earnings announcements, to check if there are any patterns preceding the announcements that are dependent on the nature of earnings. A quick visual study appears to find some commonality but deeper analysis to check the dependency of nature of earnings announcements on stock variations yielded no correlation.Further study was undertaken using industry verticals of stock and trend before announcement to come up with significant pattern using decision trees to predict nature of earnings announcements. This study suggests that while there is a significant improvement in accuracy when using industry vertical as an independent variable, there were no strong patterns. Thus the study concludes (1) there is no correlation between stock dip and nature of earnings announcements on aggregate level and (2) correlation between stock price movements, industry vertical and nature of results while do to exist, without strong patterns of emerging. It could be beyond the observable parameters in the study and could be driven by other intangible factors while having some correlation with industry verticals.

Suggested Citation

  • Karthik Narayan Pasupathy, 2016. "On the Possibility of Arbitrage Around Announcements," World Scientific Book Chapters, in: Jorge L C Sanz (ed.), Business Analytics Progress on Applications in Asia Pacific, chapter 27, pages 711-732, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813149311_0027
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    More about this item

    Keywords

    Business Analytics; Entrepreneurship; Big Data; Information Technology;
    All these keywords.

    JEL classification:

    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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