The Earnings Announcement Premium and Trading Volume
On average, stock prices rise around scheduled earnings announcement dates. We show that this earnings announcement premium is large, robust, and strongly related to the fact that volume surges around announcement dates. Stocks with high past announcement period volume earn the highest announcement premium, suggesting some common underlying cause for both volume and the premium. We show that high premium stocks experience the highest levels of imputed small investor buying, suggesting that the premium is driven by buying by small investors when the announcement catches their attention.
We thank Malcolm Baker, Gur Huberman, Jeffrey Wurgler, Wei Xiong, seminar participants at Barclays Global Investors, the Chicago Quantitative Alliance, University of Chicago, NBER, NYU, University of Illinois, The Stockholm Institute for Financial Research, Yale, and especially Nicholas Barberis and Jeremy Stein for helpful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.