eThesis - Kauppakorkeakoulun sähköiset gradut

INFORMATION TRANSFERS IN NORDIC STOCK EXCHANGES – MARKET UNDERREACTION TO INTERIM REPORT INFORMATION

PURPOSE OF THIS STUDY

The objective of this paper is to investigate whether stock market participants (investors) are able to correctly transfer quarterly earnings announcement information across companies that operate in the same industry. The focus is mainly on late announcers of the industry and on market’s ability to use the early announcers’ interim report information to estimate the late announcers’ earnings.

This paper adds new important evidence about information transfers as well as market irrationality in Nordic stock exchanges. These exchanges are Helsinki, Stockholm and Oslo.

DATA

The data for this thesis is gathered mainly from Thomson Reuters databases. Also OMX News Client as well as company websites are used to collect information. The data set includes 89 industries, 416 companies, 8274 quarterly earnings report dates and 57282 stock price observations. Companies are classified into industries using 3-digit SIC-code classification. The data covers years 1998-2009.

RESULTS

The main finding of this thesis is that market seems to underestimate the intra-industry implications of same industry companies’ quarterly earnings announcement information. This underreaction is present both for the first announcer as well as for the late announcers of the industry.

Moreover I find that the underreaction is largest especially when the market is negatively surprised by the earnings of the first announcer within industry.