Event Study on Financial Announcements: New Evidence of Stock Sensitivity and Post-Earnings-Announcement Drift

This thesis investigates the presence of abnormal returns after the companies announce their earnings (earnings-price anomaly) on 23 companies listed on STOXX 50 Europe index. Weuse the event studies framework and we summarize main models for abnormal returns' estimation with closer look on the Market Model and CAPM. We do not find considerable value added when using more complex CAPM compared to the Market Model. The results show significant abnormal returns for good news and bad news earnings surprises with bigger market reaction on good news earnings surprises. The findings also provide the evidence of market inefficiency and the possibility of pre-announcement leakage of information. We find post-earnings-announcement drift for good news earnings surprisesandthepresenceofcontrarianreturns