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Corporate Earnings Announcements and Stock Market Bubbles

Author

Listed:
  • Elie Bouri

    (School of Business, Lebanese American University, Lebanon)

  • Ufuk Can

    (Central Bank of the Republic of Turkiye, Adana, Turkiye; Centre for Applied Macroeconomic Analysis, Australian National University, Canberra, Australia; Economic Research Forum, Cairo, Egypt)

  • Oguzhan Cepni

    (Ostim Technical University, Ankara, Turkiye; University of Edinburgh Business School, Centre for Business, Climate Change, and Sustainability; Department of Economics, Copenhagen Business School, Denmark)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa)

Abstract

We examine how corporate earnings (CE) announcement shocks influence stock market bubbles in the US using daily data from January 1990 to June 2025. After identifying positive and negative bubbles over short, medium, and long-term periods, Local Projections (LP) combine information from corporate earnings announcements with the varying intensity of shocks experienced on those specific days. Results show that positive earnings shocks boost positive bubbles, particularly at the medium to long-term, while reducing negative bubbles at the short-term. Therefore, favourable earnings news can fuel prolonged speculative episodes by increasing investor optimism, and lead to deep� crashes but only mild recoveries.

Suggested Citation

  • Elie Bouri & Ufuk Can & Oguzhan Cepni & Rangan Gupta, 2025. "Corporate Earnings Announcements and Stock Market Bubbles," Working Papers 202543, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202543
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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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