Market Reaction To Earnings Announcements

Market Reaction To Earnings Announcements

I found on CXOAG this post that addresses the issue

Earnings Surprises and Future Stock Market Returns

The post reports about the study

Aggregate Market Reaction to Earnings Announcements

The authors investigate the relationship between earnings announcement surprises and market returns on the days surrounding earnings news. The analysis identifies a negative relation between earnings news and market return that persists beyond the immediate announcement period, suggesting that market participants do not immediately fully impound these future market return implications of aggregate earnings news.

There may be a considerable degree of inefficiency in the market’s processing of aggregate earnings information. Consistent with this interpretation they find that Treasury bond rates and implied future inflation expectations respond directly to earnings news.