Returns Around Earnings Announcements Worldwide

Do stocks around the world tend to perform better around the time of annual earnings announcements by respective firms than during the rest of the year? In the June 2011 draft of their paper entitled “The Earnings Announcement Premium Around the Globe”, Brad Barber, Emmanuel De George, Reuven Lehavy and Brett Trueman investigate whether the earnings announcement premium (elevated returns during earnings announcement months) is a global phenomenon or is isolated to U.S. stocks. They employ a hedge portfolio, reformed monthly, that is long (short) stocks of firms expected (not expected) to announce annual earnings during the next month, The long and short sides are equal-weighted, and the stocks within each side are value-weighted. Using roughly 200,000 annual earnings announcements for about 28,000 firms in 46 countries during 1990 through 2009 to estimate announcement months during 1991-2010, and associated monthly stock returns, they find that: (more…)