THE INFORMATION CONTENT OF ANNUAL EARNINGS RELEASES: A TRADING VOLUME APPROACH.

摘要

This study examines the association between trading volume at the time annual accounting earnings are announced and (1) the unexpected earnings in those announcements, and (2) the size of the firm. Several measures of trading (unadjusted percentage of shares outstanding traded, trading adjusted for firm-specific average level of trading, and trading adjusted for market-wide fluctuations in trading) and unexpected earnings (based on either Valueline analysts' forecasts or a simple random-walk model, using last year's earnings as the forecast for this year's earnings) were calculated. Trading volume was positively correlated with unexpected earnings and negatively correlated with firm size. That is, (1) the bigger the (absolute value) of the surprise in the earnings announcement, the more the trading, and (2) the smaller the firm, the (proportionately) greater the trading. The greater trading for the smaller firms may occur because their earnings are, relatively speaking, more surprising than the larger firms' releases. Evidence also suggests that the magnitude, but not the direction of the results is affected by factors such as fiscal year-end, stock exchange, and type of news in the earnings release (favorable or unfavorable). The results suggest that (1) earnings releases may be more valuable for certain types of firms (non-New York Stock Exchange, non-December 31, and bad news firms), and (2) there may exist a large group of relatively naive investors who base their trading decisions on a simple comparison of this year's earnings to last year's earnings.