Intraday Stock Price Variability Around Quarterly Earnings Announcements: Are markets efficient at interpreting quarterly earnings announcements?

Abstract: This study examines the market reactions to earnings announcements and investigates the relationship between market cap segment and stock price variability around quarterly earnings announcements, on the Nasdaq OMX Stockholm main market during the year of 2021. Consistent with theoretical hypothesis, the empirical analysis shows that in the days surrounding an announcement of earnings, the abnormal intraday price ranges are elevated, and the elevated ranges are sustained for up to eight days following an announcement. In the days from ten to two days leading up to an announcement, negative abnormal price ranges were observed, meaning the daily price range was lower compared to the mean non-announcement period price range. Additionally, firms listed as mid cap exhibit a larger abnormal price range during the announcement period compared to both small cap and large cap stocks at a significance level of 0.01. These results suggest that information distribution is scarcer in the days nearing an earnings announcement, and that investors value information conveyed in the earnings announcement differently, implicating a possibility for arbitrage opportunities.