Market Reaction to Earnings Information: An Empirical Study

This paper examines stock market reaction to earnings information by taking September 2001quarter earnings announcement as an event. The study is based on 149 companies, which are divided into good news, bad news and overall portfolios. We have used event study methodology to test the semistrong form of efficient market hypothesis. We have used t-test, runs test and sign test. The behavior of AARs and CAARs are examined for 30 days before and 31 days after the announcement of quarterly earnings. The results revealed that market reaction is slow and provides an opportunity to earn abnormal returns.