Intradaily Price-Volume Adjustments of NYSE Stocks to Unexpected Earnings.

Abstract

The speed and path of adjustment in stocks to the degree of earnings surprise in their quarterly announcements is studied using price-volume transactions data. A differential price adjustment process was observed, with stocks having large, positive earnings surprises experiencing a faster adjustment compared to those stocks with negative earnings surprises. Volume, transaction frequency, and size were found to be directly related to the absolute degree of surprise, but very favorable earnings surprise stocks experienced initially a large number of smaller trades while stocks with large unfavorable earnings surprises had relatively fewer transactions but higher volume per trade. Copyright 1988 by American Finance Association.