1. Quarterly Earnings Releases, Expectations, and Price Behavior
Sam Lim

2. Set-up
Purpose: to explore the relationship between analyst expectations, quarterly earnings releases, and stock price behavior.
Analyst earnings estimates and actual earnings obtained from Wharton’s WRDS, from the I/B/E/S database.
Release time of quarterly earnings announcement (BMO or AMC) obtained from Earnings.com

3. Set-up (continued) HAR-RV Model Earnings surprise factor (percentage)
RV is annualized
Earnings surprise factor (percentage)
( EPSactual - EPSestimate ) / EPSactual * 100
Run HAR-RV adding the surprise factor as a regressor. On days of quarterly earnings announcements (the day after, if announcements are made AMC), SURPRISE = surprise factor. Otherwise, SURPRISE = 0.

4. Chevron (CVX) Prices sampled every 10 minutes
Data from 10/10/2001 to 01/07/2009 (1804 days), 26 quarterly earnings releases (BMO)
RVt+1
Coeff
Std. Error
P-value
RVt
.278
.029
0.000
RVt-5,t
.584
.044
RVt-22,t
.073
.034
0.033
SURPRISE
-.044
.023
0.062
constant
.349
.094

5. Chevron (CVX)
Split-sign regression – Are the effects of negative surprises different from positive surprises?
CVX – 12 positive surprises, 13 negative surprises
RVt+1
Coeff
Std. Error
P-value
RVt
.277
.029
0.000
RVt-5,t
.583
.044
RVt-22,t
.075
.034
0.029
SURPRISE(+)
.010
.038
0.787
SURPRISE(-)
-.077
.030
0.010
constant
.338
.094

6. Amazon (AMZN) Prices sampled every 5 minutes
Data from 08/01/1997 to 01/07/2009 (2846 days), 42 earnings releases (AMC), 14 positive surprises, 23 negative surprises
Surprise days not properly lagged
RVt+1
Coeff
Std. Error
P-value
RVt
.301
.022
0.000
RVt-5,t
.302
.038
RVt-22,t
.337
.035
SURPRISE(+)
.024
0.294
SURPRISE(-)
-.010
.018
0.601
constant
.749
.218

7. Amazon (AMZN)
Surprise days lagged one day to account for AMC announcements
RVt+1
Coeff
Std. Error
P-value
RVt
.300
.022
0.000
RVt-5,t
.302
.038
RVt-22,t
.337
.034
SURPRISE(+)
.027
0.238
SURPRISE(-)
-.046
.018
0.012
constant
.749
.218
0.001

8. Pepsi (PEP) Prices sampled every 5 minutes
Data from 04/09/1997 to 01/07/2009 (2925 days), 66 earnings releases (BMO), 24 positive surprises, 8 negative surprises
RVt+1
Coeff
Std. Error
P-value
RVt
.313
.022
0.000
RVt-5,t
.287
.038
RVt-22,t
.315
.035
SURPRISE(+)
.120
.041
0.003
SURPRISE(-)
-.091
.106
0.390
constant
.491
.112

9. Chevron (CVX) Overnight returns
ln(price at market open) – ln(price at market close from previous day)
ONReturn
Coeff
Std. Error
P-value
SURPRISE(+)
.00019
.00016
0.247
SURPRISE(-)
.00050
.00015
0.001
constant
.00031
.00021
0.140

10. Chevron (CVX) Intraday Returns Sum of returns within the day
Increase in volatility not from everyone selling after negative surprises…
Return
Coeff
Std. Error
P-value
SURPRISE(+)
.00030
.00027
0.261
SURPRISE(-)
.00017
.00024
0.473
constant
.00031
.00021
0.783

11. Chevron (CVX) BNS Jump Test (Quad Power, Ratio-max adjusted)
Percentage of Jump days
No big difference – lagging has no real results either
volatility increase not from jumps
Though there could be intraday jumps…
BNS Z-Score
.1% 1% 5%
All days
1.94
5.88
14.36
Earnings Rel. days
3.85
15.38
Not ER days
1.91
5.74
14.23

12. Amazon (AMZN) Overnight Returns Intraday Returns
Sign-split regression oddities?
ONReturn
Coeff
Std. Error
P-value
SURPRISE(+)
.00062
.00027
0.000
SURPRISE(-)
.00026
.00024
0.007
constant
.00000
.00052
0.994
Return
Coeff
Std. Error
P-value
SURPRISE(+)
.00027
.00016
0.096
SURPRISE(-)
.00013
0.762
constant
.00071
.00072
0.319

13. Pepsi (PEP) Similar results as Amazon regressions.
Regressing overnight returns with surprise – statistically significant, positive relationship (p-value is nearly 0)
Regressing intraday returns with surprise – statistically insignificant, slightly negative relationship(p-value .15)
However, split-sign regression yields positive relationship significant at 10% level, but only for positive surprises (not stat. sig. for negative surprises)

14. Pfizer (PFE) Prices sampled every 5 minutes
Data from 04/09/1997 to 01/07/2009 (2923 days), 43 earnings releases (BMO), 31 positive surprises, 6 negative surprises
RVt+1
Coeff
Std. Error
P-value
RVt
.313
.022
0.000
RVt-5,t
.287
.038
RVt-22,t
.315
.035
SURPRISE(+)
.120
.041
0.003
SURPRISE(-)
-.091
.106
0.390
constant
.491
.112

15. Bank of America (BAC) Prices sampled every 15 minutes
Data from 04/09/1997 to 01/07/2009 (2923 days), 42 earnings releases (mostly BMO), 31 positive surprises, 7 negative surprises
RVt+1
Coeff
Std. Error
P-value
RVt
.339
.022
0.000
RVt-5,t
.434
.034
RVt-22,t
.174
.027
SURPRISE(+)
.070
.063
0.264
SURPRISE(-)
-.430
constant
.320
.089

16. Further analysis
Try Lee-Mykland test for jumps, to see if there are intraday jumps occurring.
Account for dispersion in analyst expectations.
Try to find what is the norm/exception (Chevron has the nicest results, is this the norm or exception?)
If Chevron’s results are the norm, how long does this uncertainty after a earnings surprise last?
Incorporate other stock-specific news announcements to see effect on stock price behavior (similar to Alison Keane’s research on macroeconomic news announcements)
Continuing with the effects of analysts theme, perhaps look at analyst recommendations (buy/hold) and stock behavior.