When are extreme daily returns not lottery? At earnings announcements!

Hung T. Nguyen; Cameron Truong

doi:10.1016/j.finmar.2018.05.001

When are extreme daily returns not lottery? At earnings announcements!

Hung T. Nguyen, Cameron Truong

Accounting

Research output: Contribution to journal › Article › Research › peer-review

Abstract

Using a sample of U.S. stocks over the period 1973–2015, we find that quarterly earnings announcements account for more than 18% of the total maximum daily returns in the top MAX portfolio. Maximum daily returns as triggered by earnings announcements do not entail lower future returns. Both portfolio and regression analyses show that the MAX phenomenon completely disappears when conditioning MAX returns on earnings announcements. We further show that earnings announcement MAX returns do not indicate a probability of future large short-term upward returns. Excluding earnings announcement MAX returns in constructing the lottery demand factor results in not only a larger lottery demand premium but also superior factor model performance.

Original language	English
Pages (from-to)	92-116
Number of pages	25
Journal	Journal of Financial Markets
Volume	92
Issue number	116
DOIs	https://doi.org/10.1016/j.finmar.2018.05.001
Publication status	Published - Nov 2018

Keywords

Cross-sectional return predictability
Earnings announcements
Extreme returns
Lottery-like payoffs

Cite this

Nguyen, H. T., & Truong, C. (2018). When are extreme daily returns not lottery? At earnings announcements! Journal of Financial Markets, 92(116), 92-116. https://doi.org/10.1016/j.finmar.2018.05.001

Nguyen, Hung T. ; Truong, Cameron. / When are extreme daily returns not lottery? At earnings announcements!. In: Journal of Financial Markets. 2018 ; Vol. 92, No. 116. pp. 92-116.

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Nguyen, HT & Truong, C 2018, 'When are extreme daily returns not lottery? At earnings announcements!', Journal of Financial Markets, vol. 92, no. 116, pp. 92-116. https://doi.org/10.1016/j.finmar.2018.05.001

When are extreme daily returns not lottery? At earnings announcements! / Nguyen, Hung T.; Truong, Cameron.

In: Journal of Financial Markets, Vol. 92, No. 116, 11.2018, p. 92-116.

Research output: Contribution to journal › Article › Research › peer-review

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