The Post-Earnings Announcement Drift. Evidence from the Finnish Stock Market
Iivonen, Toni (2010)
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According to the semi-strong form of market efficiency all publicly available information should immediately be reflected in the stock prices as soon as it is available. This study aimed to determine whether this is true in the case of earn-ings announcements in Finland. The sample consisted of 30 Finnish firms active in the industrial sector. The sample period reached from the first quarter of 2004 to the third quarter of 2009. Their quarterly earnings announcement eps were collected and compared with the consensus median analyst eps estimate ob-tained from the I/B/E/S. The estimation window for the market model was 110 days before the earnings announcement and the abnormal returns were studied in four different event windows [i.e. (0,0), (-3,1), (1,5) and (1,10)]. The results in the first window indicate that a strong reaction in the same direction as the earnings surprise is apparent for both positive and negative earnings surprises. In the second window test statistics imply that there is a positive reaction asso-ciated with a positive earnings surprise, but in case of negative earnings sur-prises the test statistics were not unanimous. In the third window a statistically significant negative reaction was associated with a negative earnings surprise. In the fourth window no statistically significant results were obtained.