Impact Of News And Information Releases Relative On Stock Price

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Literature Review

Since its foundation events study has paved the opportunity for scholars to investigate the impact of news and information releases relative to stock price in the markets. Its roots can be traced back as early as in 1930’s. According to a study by MacKinlay (1997) in his paper, cited an early paper was pioneered by Dooley (1933) who examined the stock price reaction to stock split announcements. In subsequent years, the significance of events study became an irresistible subject as it attracted the attention of John H. Myers and Archie Bakay (1948), C. Austin Baker (1956, 1957, 1958), and John Ashley (1962) who used events study methodology. A substantial number of studies have investigated the reaction of stock prices …show more content…

Using a sample data comprised 297 NYSE and American Stock Exchange companies for 1977 to 1980-time period, indicating twelve quarterly announcements for each of the company. MacKinlay (1997) utilised 30 companies which comprised into Dow Jones Industrial Index, as a sample to test the impact of quarterly earnings announcements to stock prices. The researcher examined totally 600 quarterly announcements, thus MacKinlay (1997) obtained stock price response separately to bad news, good news and no news cases of earnings per share (EPS) announcements.

A great number of studies further identified several factors which particularly concerns market capitalisation, effective of stock market, etc., which explains the dynamic forces of stocks returns during the earnings announcements date in an organised manner. For instance, Atiase (1985) found that unexpected information pass on to the market by actual earnings report is inversely correlated to the company’s capitalisation. Grant (1990) observed that the market in which a company’s securities are traded often determined the behaviour of stocks return around the earnings announcements. Several other studies have aimed to organise for synchronise factors by using time series data such as intra-day and daily data. However, a fairly number of more robust studies has examined the information content of macroeconomics news releases. Elsharkawy and Garrod (1996), Pope and Inyangete (1992).

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