Earnings Information and Stock Market Efficiency
Keywords:
efficient market hypothesis, abnormal returns, stock market, market efficiency.Abstract
This paper examines earnings information and stock market efficiency in Bahrain by taking annual earnings announcement as an event. The study is based on 32 companies listed on Bahrain Bourse. We have used event study methodology and t test. The behaviour of AARs and CAARs are examined for 30 days before and 31 days after the announcement of annual earnings. The results of the study contradict semi-strong form of efficient market hypothesis.References
[1] Ball, R. "The Earnings-Price Anomaly". Journal of Accounting and Economics, 15, 319-345, 1992.
[2] Ball, R and Brown, P. "An Empirical Evaluation of Accounting Income Numbers". Journal of Accounting Research, 6(2). 159-178, 1968.
[3] Ball, R; and Bartov, E. "How Naive is the Stock Market’s Use of Earnings Information?". Journal of Accounting and Economics, 31. 319-337, 1996.
[4] Bernard, V. L and Thomas, J.K. "Evidence that Stock Prices Do Not Fully Reflect the Implications of Current Earnings for Future Earnings". Journal of Accounting and Economics, 13, 305-340, 1990.
[5] Bernard, V.L and Thomas, J.K. "Post Earnings Announcement Drift: Delayed Price Response or Risk Premium?". Journal of Accounting Research, 27, 1-48, 1989.
[6] Brown, S.J and Warner, J.B. "Measuring Security Price Performance". Journal of Financial Economics, 8(3), 305 – 258, 1980.
[7] Brown, S.J. and Warner, J.B. "Using Daily Stock Returns: The Case of Event Studies". Journal of Financial Economics, 14. 3-31, 1985.
[8] Foster, G; Olsen, C and Shevlin, T. "Earnings Releases, Anomalies, and the Behaviour of Security Returns". Accounting Review, 59(4), 574-603, 1984.
[9] Fuller, R.J. and Farrell, J.L., Jr. “Modern Investments and Security Analysis”. Singapore: McGraw Hill Book Company, 1987.
[10] Hawaldar, I. T. “The Cross-Sectional Variation in Portfolio Returns: Evidence from Bahrain Bourse”. British Journal of Economics, Finance and Management Sciences, 12(2), 1-11, 2016.
[11] Hawaldar, I. T. “The Reaction of Bahrain Bourse to Announcement of Annual Financial Results”. International Review of Business Research Papers, 12(1), pp.64-75, 2016.
[12] Hawaldar, I. T., Shakila, B., and Pinto, P. “Empirical Testing of Month of the Year Effect on Selected Commercial Banks and Services Sector Companies Listed on Bahrain Bourse”. International Journal of Economics and Financial Issues, 7(2), 426-436, 2017.
[14] Iqbal, and Mallikarjunappa, T. “An Empirical Investigation of the Adjustment of Stock Prices to Earnings Information”. ACRM Journal of Business and Management Research, 2(1), 10-15, 2007.
[15] Iqbal, and Mallikarjunappa, T. “Market Reaction to Earnings Information: An Empirical Study”. AIMS International Journal of Management, 1(2), 153-167, 2007.
[16] Iqbal, and Mallikarjunappa, T. “An Empirical Testing of Semi-Strong Form Efficiency of Indian Stock Market”. The Journal of Amity Business School, 9(1), 24-33, 2008.
[17] Iqbal, and Mallikarjunappa, T. “Quarterly Earnings Information, Stock Returns and Stock Market Efficiency: An Empirical Study”. Gyan Management -International Biannual Refereed Journal of Management and Technology, 2(2), 37-52, 2008.
[18] Iqbal, and Mallikarjunappa, T. “The Behaviour of Indian Stock Prices and Returns: Is the Stock Market Efficient?”. Scour, 2(2), 39-46, 2008.
[19] Iqbal, and Mallikarjunappa, T. “Indian Stock Market Reaction to Quarterly Earnings Information”. Indian Journal of Finance, 3(7), 43-50, 2009.
[20] Iqbal, and Mallikarjunappa, T. “A Study of Efficiency of the Indian Stock Market”. Indian Journal of Finance, 4(5), 32-38, 2010.
[21] Iqbal, Mallikarjunappa, T., and Nayak, P. “Stock Price Adjustments to Quarterly Earnings Announcement: A Test of Semi-strong Form of Efficiency”. Gyan Management -An International Biannual Refereed Journal of Management and Technology, 1(2), 25-42, 2007.
[22] Iqbal, T. H. “Empirical Testing of Capital Asset Pricing Model on Bahrain Bourse”. Asian Journal of Finance & Accounting, 7(2), 107-119, 2015.
[23] Iqbal, T.H., and T. Mallikarjunappa. “Efficiency of Stock Market: A Study of Stock Price Responses to Earnings Announcements”. Germany: LAP Lambert Academic Publishing Company, 2011.
[24] Iqbal. “Efficiency of Indian Stock Market: A Study of Stock Price Responses to Earnings Announcement of Selected Companies Listed on Bombay Stock Exchange”. Unpublished PhD Thesis Submitted to the Mangalore University, India, 2005.
[25] Iqbal. “Seasonal Analysis of Abnormal Returns after Quarterly Earnings Announcements”. International Journal of Accounting and Financial Reporting; Doi:10.5296/ ijafr.v4i2.6622 URL: http://dx.doi.org/10.5296/ ijafr.v4i2.6622, 4(2), 501-519, 2014.
[26] Mallikarjunappa, T., and Iqbal. “Stock price reactions to earnings announcement”. Journal of IAMD and IUCBER, 26(1), 53-60, 2003.
[27] Mallikarjunappa, T., and Iqbal, T. H. “An Investigation of the Semi-strong Form of Stock Market Efficiency”. In Proceedings of Tenth AIMS International Conference, January 2013, 1588-1596.
[28] Watts, R.L. "Systematic Abnormal Returns after Quarterly Earnings Announcements". Journal of Financial Economics, 6. 127-150, 1978.
[29] Woodruff, C.J and Senchack, A.J., Jr. "Intra-daily Price Volume Adjustments of NYSE Stocks to Unexpected Earnings". Journal of Finance, 43, 467- 491, 1988.
[2] Ball, R and Brown, P. "An Empirical Evaluation of Accounting Income Numbers". Journal of Accounting Research, 6(2). 159-178, 1968.
[3] Ball, R; and Bartov, E. "How Naive is the Stock Market’s Use of Earnings Information?". Journal of Accounting and Economics, 31. 319-337, 1996.
[4] Bernard, V. L and Thomas, J.K. "Evidence that Stock Prices Do Not Fully Reflect the Implications of Current Earnings for Future Earnings". Journal of Accounting and Economics, 13, 305-340, 1990.
[5] Bernard, V.L and Thomas, J.K. "Post Earnings Announcement Drift: Delayed Price Response or Risk Premium?". Journal of Accounting Research, 27, 1-48, 1989.
[6] Brown, S.J and Warner, J.B. "Measuring Security Price Performance". Journal of Financial Economics, 8(3), 305 – 258, 1980.
[7] Brown, S.J. and Warner, J.B. "Using Daily Stock Returns: The Case of Event Studies". Journal of Financial Economics, 14. 3-31, 1985.
[8] Foster, G; Olsen, C and Shevlin, T. "Earnings Releases, Anomalies, and the Behaviour of Security Returns". Accounting Review, 59(4), 574-603, 1984.
[9] Fuller, R.J. and Farrell, J.L., Jr. “Modern Investments and Security Analysis”. Singapore: McGraw Hill Book Company, 1987.
[10] Hawaldar, I. T. “The Cross-Sectional Variation in Portfolio Returns: Evidence from Bahrain Bourse”. British Journal of Economics, Finance and Management Sciences, 12(2), 1-11, 2016.
[11] Hawaldar, I. T. “The Reaction of Bahrain Bourse to Announcement of Annual Financial Results”. International Review of Business Research Papers, 12(1), pp.64-75, 2016.
[12] Hawaldar, I. T., Shakila, B., and Pinto, P. “Empirical Testing of Month of the Year Effect on Selected Commercial Banks and Services Sector Companies Listed on Bahrain Bourse”. International Journal of Economics and Financial Issues, 7(2), 426-436, 2017.
[14] Iqbal, and Mallikarjunappa, T. “An Empirical Investigation of the Adjustment of Stock Prices to Earnings Information”. ACRM Journal of Business and Management Research, 2(1), 10-15, 2007.
[15] Iqbal, and Mallikarjunappa, T. “Market Reaction to Earnings Information: An Empirical Study”. AIMS International Journal of Management, 1(2), 153-167, 2007.
[16] Iqbal, and Mallikarjunappa, T. “An Empirical Testing of Semi-Strong Form Efficiency of Indian Stock Market”. The Journal of Amity Business School, 9(1), 24-33, 2008.
[17] Iqbal, and Mallikarjunappa, T. “Quarterly Earnings Information, Stock Returns and Stock Market Efficiency: An Empirical Study”. Gyan Management -International Biannual Refereed Journal of Management and Technology, 2(2), 37-52, 2008.
[18] Iqbal, and Mallikarjunappa, T. “The Behaviour of Indian Stock Prices and Returns: Is the Stock Market Efficient?”. Scour, 2(2), 39-46, 2008.
[19] Iqbal, and Mallikarjunappa, T. “Indian Stock Market Reaction to Quarterly Earnings Information”. Indian Journal of Finance, 3(7), 43-50, 2009.
[20] Iqbal, and Mallikarjunappa, T. “A Study of Efficiency of the Indian Stock Market”. Indian Journal of Finance, 4(5), 32-38, 2010.
[21] Iqbal, Mallikarjunappa, T., and Nayak, P. “Stock Price Adjustments to Quarterly Earnings Announcement: A Test of Semi-strong Form of Efficiency”. Gyan Management -An International Biannual Refereed Journal of Management and Technology, 1(2), 25-42, 2007.
[22] Iqbal, T. H. “Empirical Testing of Capital Asset Pricing Model on Bahrain Bourse”. Asian Journal of Finance & Accounting, 7(2), 107-119, 2015.
[23] Iqbal, T.H., and T. Mallikarjunappa. “Efficiency of Stock Market: A Study of Stock Price Responses to Earnings Announcements”. Germany: LAP Lambert Academic Publishing Company, 2011.
[24] Iqbal. “Efficiency of Indian Stock Market: A Study of Stock Price Responses to Earnings Announcement of Selected Companies Listed on Bombay Stock Exchange”. Unpublished PhD Thesis Submitted to the Mangalore University, India, 2005.
[25] Iqbal. “Seasonal Analysis of Abnormal Returns after Quarterly Earnings Announcements”. International Journal of Accounting and Financial Reporting; Doi:10.5296/ ijafr.v4i2.6622 URL: http://dx.doi.org/10.5296/ ijafr.v4i2.6622, 4(2), 501-519, 2014.
[26] Mallikarjunappa, T., and Iqbal. “Stock price reactions to earnings announcement”. Journal of IAMD and IUCBER, 26(1), 53-60, 2003.
[27] Mallikarjunappa, T., and Iqbal, T. H. “An Investigation of the Semi-strong Form of Stock Market Efficiency”. In Proceedings of Tenth AIMS International Conference, January 2013, 1588-1596.
[28] Watts, R.L. "Systematic Abnormal Returns after Quarterly Earnings Announcements". Journal of Financial Economics, 6. 127-150, 1978.
[29] Woodruff, C.J and Senchack, A.J., Jr. "Intra-daily Price Volume Adjustments of NYSE Stocks to Unexpected Earnings". Journal of Finance, 43, 467- 491, 1988.
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Published
2017-05-03
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Joseph, D. N. R., Kumar, D. N., Dr. Lokesh, D. L., & Kumar, K. A. (2017). Earnings Information and Stock Market Efficiency. American Scientific Research Journal for Engineering, Technology, and Sciences, 31(1), 92–100. Retrieved from https://asrjetsjournal.org/index.php/American_Scientific_Journal/article/view/2942
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