Realized moments and the cross-sectional stock returns around earnings announcements

Article

Wang, Qingxia, Faff, Robert and Zhu, Min. 2022. "Realized moments and the cross-sectional stock returns around earnings announcements." International Review of Economics and Finance. 79, pp. 408-427. https://doi.org/10.1016/j.iref.2022.02.036
Article Title

Realized moments and the cross-sectional stock returns around
earnings announcements

ERA Journal ID18553
Article CategoryArticle
AuthorsWang, Qingxia (Author), Faff, Robert (Author) and Zhu, Min (Author)
Journal TitleInternational Review of Economics and Finance
Journal Citation79, pp. 408-427
Number of Pages20
Year2022
PublisherElsevier
Place of PublicationNetherlands
ISSN1059-0560
1873-8036
Digital Object Identifier (DOI)https://doi.org/10.1016/j.iref.2022.02.036
Web Address (URL)https://www.sciencedirect.com/science/article/pii/S1059056022000570
Abstract

We examine the predictability of realized measures on the cross-section of stock returns around earnings announcements. We construct realized measures (variance, skewness, kurtosis, and relative jump) using high-frequency intraday stock prices. Our results show that realized variance, skewness, and relative jumps strongly predict stock returns around earnings announcements but realized kurtosis does not. These findings are robust to various event windows, after controlling for firm characteristics, and to a range of additional tests. We further show that the predictability of realized measures is not affected by unexpected earnings. The findings also suggest that pre-announcement realized measures absorb part of the information contained in unexpected earnings.

KeywordsCross-sectional stock returns; Earnings announcements; Realized measures
ANZSRC Field of Research 2020380202. Econometric and statistical methods
380204. Panel data analysis
350710. Organisational behaviour
380203. Economic models and forecasting
380201. Cross-sectional analysis
380107. Financial economics
Byline AffiliationsCentre for Applied Climate Sciences
Bond University
University of Queensland
Institution of OriginUniversity of Southern Queensland
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