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Does the Stock Market Overreact to Corporate Earnings Information?

Does the Stock Market Overreact to Corporate Earnings Information? ABSTRACT This paper tests whether the stock market overreacts to extreme earnings, by examining firms' stock returns over the 36 months subsequent to extreme earnings years. While the poorest earners do outperform the best earners, the poorest earners are also significantly smaller than the best earners. When poor earners are matched with good earners of equal size, there is little evidence of differential performance. This suggests that size, and not investor overreaction to earnings, is responsible for the “overreaction” phenomenon, the tendency for prior period losers to outperform prior period winners in the subsequent period. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Does the Stock Market Overreact to Corporate Earnings Information?

The Journal of Finance , Volume 44 (5) – Dec 1, 1989

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References (14)

Publisher
Wiley
Copyright
1989 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1989.tb02660.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT This paper tests whether the stock market overreacts to extreme earnings, by examining firms' stock returns over the 36 months subsequent to extreme earnings years. While the poorest earners do outperform the best earners, the poorest earners are also significantly smaller than the best earners. When poor earners are matched with good earners of equal size, there is little evidence of differential performance. This suggests that size, and not investor overreaction to earnings, is responsible for the “overreaction” phenomenon, the tendency for prior period losers to outperform prior period winners in the subsequent period.

Journal

The Journal of FinanceWiley

Published: Dec 1, 1989

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