Earnings announcement reactions in bull and bear markets - Insights from OMX Helsinki 25 companies
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School of Business |
Bachelor's thesis
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Authors
Date
2024
Department
Major/Subject
Mcode
Degree programme
Rahoitus
Language
en
Pages
27
Series
Abstract
I use data from companies listed in the OMX Helsinki 25 index between 2008 and 2023 to examine the impact of market phases on reactions to earnings announcements. Employing an event study methodology, I calculate abnormal and cumulative abnormal returns around earnings announcement dates, categorising surprises as positive, neutral, or negative. Comparing these reactions between bull and bear markets, my results show that market phases significantly influence reactions to both negative and positive earnings surprises. However, statistically significant reactions are generally confined to the announcement day and its immediate vicinity. Specifically, negative surprises during bear markets lead to an initial overreaction followed by partial price corrections, whereas reactions in bull markets are more efficient. In contrast, positive surprises during bear markets exhibit underreaction and a post-earnings-announcement drift, while reactions in bull markets remain more efficient. Reactions to neutral earnings surprises do not have significant differences across market phases.Description
Thesis advisor
Kokkonen, JoniKeywords
abnormal returns, bear market, bull market, earnings announcements, market efficiency, event study