Publication Type

Journal Article

Version

submittedVersion

Publication Date

5-2013

Abstract

In a competitive information market, no single information source is likely to dominate all other sources collectively, but a single source can dominate all or most other sources individually. We explore whether earnings announcements constitute such a dominant source using Ball and Shivakumar’s R2 metric: the proportion of the variation in annual returns explained by earnings announcement returns. We find that earnings announcement R2 is 11% -- higher than the corresponding R2 of returns on days with dividend announcements, management forecasts, preannouncements, 10-K and 10-Q filings and amendments. Only the four largest realized absolute daily returns in a year match the ability of earnings announcement returns to explain annual returns. We conclude that earnings announcements are the single most important source of new information in the equity market.

Keywords

earnings information arrival days, conditional information content, information monopoly, incremental information

Discipline

Corporate Finance | Portfolio and Security Analysis

Research Areas

Finance

Publication

American Accounting Association Annual Meeting, San Francisco, 31 July - 4 August 2010

Volume

22

Issue

2

First Page

221

Last Page

256

ISSN

0963-8180

Publisher

European Accounting Review

City or Country

San Francisco, USA

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