Impact Of News And Information Releases Relative On Stock Price

Society’s reaction to news and events can affect what happens to the price of stocks. This is what happened to United Continental Holdings (UAL) and Lakeland Industries (LAKE) after two powerful events that happened in America. For United Continental Holdings, the event that had a major impact on its stock price was the September 9 terrorism attack, and for Lakeland Industries it was the 2014 ebola scare.

The stock markets have had an enjoyable ride higher since the election. The S&P 500 stock market index has advanced over 10% since then. The stocks markets have recently reached all-time highs and it is understandable that investors want to be more aggressive. Most of this recent market advance is based upon the belief that the new administration will pursue policies which are favorable to corporate America.

More recently, Kim & Zhang (2015) have found a an empirical evidence that releasing the accumulated bad news all at once would lead to stock price crashes. They find a negative association between the degree (changes) of conditional conservatism and the likelihood (changes) of a firm experiencing future stock price crashes and this association is more pronounced in an environment with higher information asymmetries.

In traditional financial theories, the most important assumption is the efficient market. However, numerous evidences show investors’ behaviour does not exactly match with the technical analysis from these models, and their emotion is the important factor resulting in the bias (Baker and Nofsinger 2002). Of which, the weather is one of the significant variables that affect the investors’ mood (Loughran and Schultz 2004). In this essay, I will discuss the issue whether the weather affects the stock market by providing various literatures evidences and my personal opinion. Whether the findings in the literatures violate the efficient market hypothesis is also examined.

In addition to the analysis of the macroeconomic events that has affected the stock indexes for both the U.S. and Europe, I constructed a two stock portfolio made of Target Corporation (TGT) and Ralph Lauren Corporation (RL). Both of these stocks had equal weights in my portfolio. Everything that has been discussed in the macroeconomic section of this paper affects the returns of my two stock portfolio as well. In addition, there were different managerial decisions made that affect the stock’s weekly return. For example, both stocks paid out a dividends during the time. Individually, Target released sales and profit decline for the holiday seasons gave a gloomy outlook to 2017 profit, which had a huge effect on the stocks return for that

Rumor is defined by the Oxford English Dictionary as “an unverified or unconfirmed statement or report circulating in a community.” In the financial community, rumors have an effect on the direction of markets. The New York Stock Exchange in the United States is the epitome of how rumors can impact trade. The fluctuation of stock and commodity (raw material) prices on a daily basis is, in part, due to the daily news cycle. Although reports by news companies are supposed to be factual, statements made can be unverified. Because of the large scale of social media, anyone can make up rumors that can go viral. Stock traders rely on the news to determine what stocks they will buy or sell. News reports include important information such as: new product developments, company restructures, commodity reports, and scandals. Because of the rapid news, trading on the stock market happens very fast and it gets chaotic. As the buyers and sellers interact their process sets the stock price. The news effects the stock price because if a positive story circulates, there will be more buyers for a stock, which will raise the stock price; if a negative story circulates, there will be fewer buyers, which will lower the stock price. This constant process can either earn a big payday or be a total loss. Because of the money that people stand to either make or loose, rumors have an effect on the way individuals behave on the stock market.

Many researchers have tested the validity of the semi-strong form of the Efficient Market Hypothesis through testing major announcement event such as dividend announcements and bonus issue announcements. (Khan and Ikram, 2010), This is because the announcements may offer desirable factors to the market which will influence stock prices. Observing the performance of mutual funds and brokerage companies is the second aspect for evaluating the semi-strong form of market efficiency (Khan and Ikram,2010). This is because brokers and fund managers are believed to have access to non public information that gives them an advantage when trading on the stock market.

One of confound empirical findings reported in recent finance literature is the presence of abnormally high stock returns on the day before holidays. In this paper, we are trying to investigate the holiday effects in a novel context. Specifically, we attempt to test the presence of holiday effect for a sub-group of stocks namely, the cross-listing stocks. We are interested in the holiday effects for the US stocks that are listed in a forging stock exchange. Both academic and practitioners in the field of finance have investigated the holiday effects. In one hand, practitioners have documented the holiday effects on U.S. stocks for a long period of time (e.g., Merrill (1965) and Fosback (1976)). In the other hand, the

The main reason, that financial statement impact the share price, is the efficient capital market. Namely, the efficient security market will go hand in hand with full disclosure. Once the relevant information provided by the management on the timely basis, the rational investors could make decision based on the new information.

Different companies or organizations in reference to any profit made by the company use the term earnings. As a result, earnings are very important to the company especially the listed companies as a means of investors for evaluating or analyzing in their determination of the attentiveness of any company or of a particular stock. In addition, earnings are very critical in the determination of the stock price of any company (Jim, 2012). Owing to this, any company with low earnings would typically have a lower share price compared to those with better prospects. Additionally, earnings represent the ability of the company to generate profit in the future thereby driving the stock price of the company.

The relationship between published financial or accounting information and capital market is a complex one. The capital market is affected by analyst’s forecasts and expectations putting pressure on companies to adjust their reported earning numbers. Share prices are affected by the way corporate profits and balance sheet data

Event studies focus on the impact of a firm’s announcements on the same firm’s stock prices. To a certain extent, when an event is unexpected, the magnitude of abnormal performance is a measure of the impact of that type of event on the wealth of a firm’s shareholders (Brown and Warner, 1980).

This research examine the stock market reaction to the announcement of Fortune magazine’s list of The 100 Best Companies to Work For over the

Large price fluctuations could be explained not only by the new information on future dividends as efficient market model says, but also by factors such as the investor sentiment. Baker & Wurgler (2007) construct an investor sentiment index and quantify its impact on stock prices. Despite their important contribution to the theory of behavioral finance, their conclusions are subject to debate.

An event study measures economic effect of a specific corporate event or economy wide event on the share price of the firm, it dominates the empirical research. Typically, it examines the wealth effects and price effect of corporate event on security price around first announcement date. In the event study, the basic assumption is that market is semi-strong form efficient which ensures corresponding price movement with regards to new corporate information. Event study has abundant applications in the long history since the first published paper by James Dolley (1933). There are several types of return generated by event study, including observed return, abnormal return and expected return.