Asked by Marisa Tavarez on May 22, 2024
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Companies that report bad news earnings surprises tend to have an upward drift in stock returns before the actual earnings announcement date followed by a sharp decrease in stock returns at the announcement date.
Bad News Earnings Surprises
Occur when a company reports lower earnings than market analysts' expectations, often leading to a negative reaction in the stock market.
Stock Returns
The gain or loss on a stock investment, typically expressed as a percentage of the investment's initial cost.
Earnings Announcement Date
The specific date on which a company publicly releases its financial performance for a specific period, usually quarterly or annually.
- Fathom the influence of efficient market theory and rationality in determining stock prices based on the anticipation of future earnings and cash flows.
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Learning Objectives
- Fathom the influence of efficient market theory and rationality in determining stock prices based on the anticipation of future earnings and cash flows.
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