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Overnight earnings announcements and preopening price discovery

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  • Xiao, Xijuan
  • Yamamoto, Ryuichi

Abstract

This study examines the market responses to announcements of stocks with different trading activities that disclose earnings during and outside normal trading hours. For less actively traded stocks, when bad news is reported after the market closes, potential informed trading exists, along with heightened return reversals and market inefficiency before the release. These informed trading activities are partially responsible for the post-announcement preopening price adjustments. Although the after-release preopening period for inactive stocks does not significantly facilitate price discovery as much as for active stocks, it provides an environment to resolve order imbalances after overnight information.

Suggested Citation

  • Xiao, Xijuan & Yamamoto, Ryuichi, 2024. "Overnight earnings announcements and preopening price discovery," Japan and the World Economy, Elsevier, vol. 70(C).
    • Handle: RePEc:eee:japwor:v:70:y:2024:i:c:s0922142524000124
    DOI: 10.1016/j.japwor.2024.101249
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    More about this item

    Keywords

    Earnings announcement; Overnight information; Informed trading; Preopening price discovery;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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