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The Earnings Announcement Premium and Trading Volume

  • Owen Lamont
  • Andrea Frazzini

On average, stock prices rise around scheduled earnings announcement dates. We show that this earnings announcement premium is large, robust, and strongly related to the fact that volume surges around announcement dates. Stocks with high past announcement period volume earn the highest announcement premium, suggesting some common underlying cause for both volume and the premium. We show that high premium stocks experience the highest levels of imputed small investor buying, suggesting that the premium is driven by buying by small investors when the announcement catches their attention.

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File URL: http://www.nber.org/papers/w13090.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13090.

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Date of creation: May 2007
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Handle: RePEc:nbr:nberwo:13090
Note: AP
Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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  1. John Y. Campbell & Tuomo Vuolteenaho, 2003. "Bad Beta, Good Beta," NBER Working Papers 9509, National Bureau of Economic Research, Inc.
  2. Jianping Mei & Jose A. Scheinkman & Wei Xiong, 2009. "Speculative Trading and Stock Prices: Evidence from Chinese A-B Share Premia," CEMA Working Papers 504, China Economics and Management Academy, Central University of Finance and Economics.
  3. Hong, Harrison & Yu, Jialin, 2009. "Gone fishin': Seasonality in trading activity and asset prices," Journal of Financial Markets, Elsevier, vol. 12(4), pages 672-702, November.
  4. Baker, Malcolm & Litov, Lubomir & Wachter, Jessica A. & Wurgler, Jeffrey, 2010. "Can Mutual Fund Managers Pick Stocks? Evidence from Their Trades Prior to Earnings Announcements," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(05), pages 1111-1131, October.
  5. Baker, Malcolm & Stein, Jeremy C., 2004. "Market liquidity as a sentiment indicator," Journal of Financial Markets, Elsevier, vol. 7(3), pages 271-299, June.
  6. Jose A. Scheinkman & Wei Xiong, 2003. "Overconfidence and Speculative Bubbles," Journal of Political Economy, University of Chicago Press, vol. 111(6), pages 1183-1219, December.
  7. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-68, September.
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