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Business

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The stock market response to earnings announcements released during trading versus nontrading periods

Article Abstract:

The effects of earnings announcements during trading and nontrading hours are examined and compared. Market reactions in adjacent years are measured as changes in prices and volumes due to trading or daytime announcements and nontrading or overnight announcements of earnings for the same firm. The analysis shows that investors' opening trades do not reflect overnight information due to the submission of only partial orders by the traders at the open. Reluctance to submit full orders and trade postponement for market observation may account for such behaviors. These results suggest that investors who submit orders before the opening trade based on the forecast error sign can earn about 1.4% cumulative excess return at the market close.

Security and commodity exchanges, Research, Prices and rates, Stocks, Stock-exchange, Stock exchanges, Stock prices

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Comparing the accuracy and explainability of dividend, free cash flow, and abnormal earnings equity value estimates

Article Abstract:

A study supplying empirical evidence on reliability of intrinsic value estimates derived from the discounted dividend (DIV), discounted free cash flow (FCF), and discounted abnormal earnings (AE) models is presented. The three valuation models are theoretically equivalent, but calculations from Value Line estimates show a contrast between reliability expressed in terms of accuracy and in terms of explainability. Inconsistent attributes, growth rates, or discount rates cause the models to yield different estimates in practice. AE value estimates are concluded to have smaller bias than DIV or FCF estimates in absolute terms, reinforcing an earlier study.

Science & research, Analysis, Accounting, Valuation, Equity (Law)

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Have financial statements lost their relevance?

Article Abstract:

The authors investigate the significance of corporate financial accounting, focusing on the use of financial statements to forecast future corporate earnings. An evaluation of current financial reporting methods, investors' dependence on statements, and models of different financial accounting techniques are presented.

Statistical Data Included, Models, Usage, Accounting and auditing, Corporations, Financial analysis, Financial management, Financial statements, Disclosure statements (Accounting)

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