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Market Reaction to Earnings Announcements Under Different Volatility Regimes

Author

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  • Yusuf Joseph Ugras

    (Accounting Department, School of Business, La Salle University, 1900 West Olney Ave., Philadelphia, PA 19141, USA)

  • Mark A. Ritter

    (Department of Finance, Jack Welch College of Business, Sacred Heart University, 5151 Park Ave., Fairfield, CT 06825, USA)

Abstract

This study investigates the occurrence and persistence of abnormal stock returns surrounding corporate earnings announcements, particularly emphasizing how varying frequencies of financial reporting influence market behavior. Specifically, this research examines the effects of the timing and frequency of disclosures on market reactions and stock price volatility during critical earnings announcement periods. By analyzing firms within the Dow Jones Industrial Average (DJIA) from 2014 to 2024, this study evaluates the interplay between financial reporting schedules and market responses to stock prices. Furthermore, it considers the impact of peer firms’ reporting practices on the assimilation of firm-specific information into stock prices. Using econometric models, including Vector Auto Regression (VAR), Impulse Response Functions (IRFs), and Self-Exciting Threshold Autoregressive (SETAR) models, causal relationships between reporting frequency, stock price volatility, and abnormal return patterns across different volatility regimes are identified. The findings highlight that quarterly reporting practices intensify market responses and contribute to significant variations in stock price behavior in high-volatility periods. These insights provide a deeper understanding of the role of financial disclosure practices and forward-looking guidance in shaping market efficiency. This study contributes to ongoing discussions about balancing the transparency benefits of frequent reporting with its potential to amplify market volatility and sector-specific risks, offering valuable implications for policymakers, investors, and corporate managers.

Suggested Citation

  • Yusuf Joseph Ugras & Mark A. Ritter, 2025. "Market Reaction to Earnings Announcements Under Different Volatility Regimes," JRFM, MDPI, vol. 18(1), pages 1-13, January.
    • Handle: RePEc:gam:jjrfmx:v:18:y:2025:i:1:p:19-:d:1560648
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    References listed on IDEAS

    as
    1. Abdelkhalik, Ar & Espejo, J, 1978. "Expectations Data And Predictive Value Of Interim Reporting," Journal of Accounting Research, Wiley Blackwell, vol. 16(1), pages 1-13.
    2. Butler, Marty & Kraft, Arthur & Weiss, Ira S., 2007. "The effect of reporting frequency on the timeliness of earnings: The cases of voluntary and mandatory interim reports," Journal of Accounting and Economics, Elsevier, vol. 43(2-3), pages 181-217, July.
    3. deHaan, Ed & Shevlin, Terry & Thornock, Jacob, 2015. "Market (in)attention and the strategic scheduling and timing of earnings announcements," Journal of Accounting and Economics, Elsevier, vol. 60(1), pages 36-55.
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