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Annual Earnings Announcements and Market Reaction: The Influence of Screening Criteria for Thin Trading

Research output: Working paperResearch

  • Accounting Research Centre - ARC
  • Department of Business Studies
This paper presents the findings of an event study of the Danish stock market price reactions to annual earnings announcements in the period 1993-1997, with a dual purpose. The primary purpose is to find out how market reactions vary with different screening criteria for thin trading. Our findings on this point suggest that the Danish stock market, although small, seems to have different segments of shares in relation to earnings announcements. Applying different screening criteria we find differences both in terms of how quickly the market reacts to earnings announcements and the relative quality of the naïve earnings expectation model and an earnings expectation model based on I/B/E/S EPS-estimates. The I/B/E/S-model is found to have higher descriptive validity for the big, frequently traded companies while the naïve model has higher descriptive validity for the smaller companies. The secondary purpose of our study is briefly to compare our findings with those of a similar study for the period 1971-1981. The aim is to find indications of developments in the Danish market's reactions to earnings announcements since that study. We find distinct indications that the Danish stock market in some respects has become more efficient in the period between the two studies.
Original languageEnglish
Publication statusPublished - 2001

    Research areas

  • Market Reactions, Annual earnings announcements, Screening criteria, Thin trading, Expectation models, IBES, Naive expectation model, Event study, EPS estimates

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ID: 32302941