The Study On Market’s Asymmetric Reaction To Earnings Preannouncement

As investors improve timeliness and effectiveness of the listed company informationdisclosure, earnings preannouncement arises at the historic moment.Earnings preannouncementis the first time that investors prior to the formal report access to information about theperformance of listed companies. As a useful supplement of formal report, it plays an importantrole in reducing the information asymmetry between investors and listed companies. This paperstudy around the earnings preannouncement by empirical research, it aims to discuss thepreliminary results released before and after the short-term market of asymmetric reactions, aswell as the earnings preannouncement information explanatory power in the asymmetricresponse of the market.As ancillary normative research, this paper generalizes the performance forecast system inChina and compares forecast system at home and abroad.This paper reviews the literature aboutearnings preannouncement information content and the market of asymmetric reaction at homeand abroad. On the basis of theoretical analysis, I put forward the research hypothesis; Then theregression model are established and samples are selected; Finally, this article selects2005~2011annual earnings preannouncement as the research object, based on Pagan and SossounovBB method to differentiate period, I discuss the market reaction to the good news and bad newsin different periods; And, through its different characteristics to distinguish (p/e ratio, risk, scaleof high and low), and discuss what are the factors that affect the market for the good news andbad news of asymmetric reactions.Analysis results show that: first, the market reaction to bad news is stronger than good newsin bad time, the market reaction to the good news is stronger than bad news in good time. It alsoproves that the stock market in China be in line with the theory of behavioral financetheory:markets are not perfect, investors are influenced by irrational factors when makinginvestors decision, the efficiency of the market needs to be improved; Second, the market’sresponse to bad news is stronger than good news for growth stock, riskier companies reaction tobad news is stronger than low risk companies.By discussing what are the factors that affect themarket’s asymmetric reactions to good news and bad news, it can help investors understand the influence of different company performance forecast on stock prices, thereby help investorsmake a more reasonable analysis and judgment,and improve the investment decision-makingability.