Earnings announcements and stock market returns. An event study of the Nordic market.

We have examined the effects of quarterly earnings announcements on stock returns, in the Nordic market. Our main objective, is to test market efficiency using the event study methodology. Earlier research has found evidence of drift in stock return, following earnings announcements. We therefore examine both the pre- and post-announcement period. Three different time-series models are used to capture the earnings surprise. The earnings are categorized into three categories; good news, bad news and no news. Our results show that the Nordic market reacts quickly to earnings announcement, and that earnings have information value. However, we find significant post-announcement drift for good news in the aggregated Nordic market, and for companies with low market capitalization. We also find significant reactions before the announcement of good news, both for the aggregated Nordic market and for each country, except Denmark