Great Increase Earnings Preannouncement On Stock Returns

Utilizing the market and financial data of listed companies in2012, this paper studied the distributions and characteristics of thecompanies that issued great increase earnings preannouncement(GIEP)by season. At the same time, it examined the abnormal return of thesecompanies before and after the earnings preannouncement date, doingempirical researches on the candidate factors which might have theimpacts on the returns and setting up the trading strategy to testify thestudy results.In general, the companies listed in Shenzhen StockExchange(SZSE) turn out to have more GIEP than which listed inShanghai Stock Exchange(SHSE) both in the ratio and value. Also theprice movement is more active for SZSE before and after the earningspreannouncement date. By event analysis on quarterly averagecumulative abnormal return, the paper revealed that the companies in firstquarter record the most value in short-term abnormal return after GIEP. Making use of the multivariable regression analysis like Barra model, thispaper constructed an empirical test on average cumulative abnormalreturn, which showed that the abnormal return after GIEP is positivelyrelated to relative increase in earnings preannouncement and negativelyrelated to relative premium on index in the early period. By two screeningmethods out of quantitative equity portfolio management, the paper alsotried to set up two trading strategies based on the regression result andfound there is industry focus for high abnormal return companies whilethere is no significant bias on specific industry year by year.