Munich Personal RePEc Archive

Stock price reaction to earnings announcement: the case of an emerging market

Iqbal, Javed and Farooqi, Faraz Ahmed (2011): Stock price reaction to earnings announcement: the case of an emerging market.

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Abstract

In an efficient stock market stock prices instantaneously and accurately adjust to new information. This paper conducts an event study analysis on an emerging market namely the Karachi Stock Exchange (KSE) by investigating the stock price reaction to public announcement of quarterly after tax profit by listed firms. By employing 5 year data on stock prices from January 2004 to August 2008 for 114 non financial firms we found that there is no abnormal return post earnings announcement. Moreover the study provides evidence that there is a bigger element of surprise in bad news than in good news as the market reaction to bad news is stronger.

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