Earnings Announcement And Intraday Stock Price Behavior In Chinese Stock Market

This paper works on the market reaction as well as its speed after earnings announcement using intraday price-volume transaction data.Unlike the traditional PEAD(post earnings announcement drift)phenomenon,we focus on the market microstructure around earnings announcement.We use the minimum of analyst expectations as a proper proxy for market expectation of earnings information that fits the Chinese stock market.We find out that several trading days ahead of earnings announcement,information leakage is already on the way.We also provide one pattern of insider trading behavior where those traders lurk in the market during opening quotation but have their trades done in several minutes after the market opens.On the earnings announcement day,the risk adjusted return is of the same direction of earnings surprise.The overall speed of price adjustment is fast,nearly always done in the same day.There are mainly two stages in the process of price adjustment on earnings announcement day,overreaction and fixing.The overreaction phase often lasts for no more than 10 minutes after market opens and then follows the fixing phase.Although traders based on public information can benefit on their trades in opening quotation and the following 10 minutes,insider trades are much more profitable in pre-announcement periods.