Earnings Announcement Clusters and Market Risk Premium

Citation:

Yixin Chen, Randolph Cohen, and Zixuan (Kevin) Wang. In Preparation. “Earnings Announcement Clusters and Market Risk Premium”. Copy at http://j.mp/2HspxQz
Slides.pdf313 KB

Abstract:

We identify a set of “earnings announcement (EA) cluster days” as days when a large fraction of the firms in the market (measured by market cap) announce earnings. These days exhibit significantly higher market premium and stronger risk-return tradeoff. The EA cluster days account for only 3.7 percent of the total sample but explains 21.5% of the equity risk premium. The Capital Asset Pricing Model (CAPM) holds well on EA cluster days, but fails to hold on the other days. In addition, we find the treasury bonds deliver significantly negative returns on EA cluster days.

Last updated on 03/21/2019