Earnings announcement excess returns
factor.formula
Earnings announcement excess return = individual stock announcement period cumulative return - benchmark index announcement period cumulative return
in:
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The earnings announcement excess return refers to the excess return of an individual stock relative to the market benchmark during the earnings announcement period (usually one trading day before and after the announcement date, a total of three trading days).
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The cumulative return of stock i during the earnings announcement period [t-1, t+1]. Where t represents the earnings announcement date, t-1 represents the trading day before the announcement date, and t+1 represents the trading day after the announcement date. The calculation formula is: (P_{t+1} - P_{t-1}) / P_{t-1}, where P represents the stock price.
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The cumulative return of the market benchmark index m during the earnings announcement period [t-1, t+1]. The calculation method is the same as the return of individual stocks. Usually, an index that is representative of the market where the individual stock is located is selected, such as the CSI 300 Index, the CSI 500 Index, etc.
factor.explanation
This factor is calculated by subtracting the cumulative return of individual stocks within three trading days before and after the earnings announcement (including the announcement day) from the cumulative return of the market benchmark index during the same period. This treatment is to eliminate the impact of overall market fluctuations, so as to more accurately measure the independent impact of earnings announcements on individual stock prices. A positive excess return usually means that the company's earnings announcement has brought a positive surprise, and vice versa.