Bimodality In Interim Reports: An Analysts' View

Cumulative abnormal residuals (cars) show how markets adjust to published information. Theoretically, cars are assumed to display unit normal behavior.  Despite its merits, car has proved to be a somewhat imprecise measure of market response to published information.  In practice, cars exhibit considerable deviation from theoretical unit normal behavior. Three disparities between theory and practice can be pinpointed.  These are car: (1) location, (2) shape, and (3) stability.  In our previous work we have demonstrated that cars are often bimodally distributed.  This finding shows one reason why it takes semistrong efficient markets some time to digest new information. Cars, for the time period during which markets analyze the new value determining data, are usually bimodally distributed. One mode of the distribution represents the impact of good news. The other peak is caused by bad news.  The valley, between the two peaks, indicates the influence of neutral news.  This paper analyzes the interim reports, which constitute the data for our previous related studies. This research identifies the type of new information that creates bimodal cars