Famous Firms, Earnings Clusters, and the Stock Market

Wed September 2, 2020

Yixin Chen
University of Rochester - Simon Business School

Randolph B. Cohen
Harvard University - Business School (HBS)

Zixuan (Kevin) Wang
Harvard Business School

Wall Street Horizon Abstract

Using Wall Street Horizon earning dates, the paper finds that each quarter has a handful of days with the potential to have an impressive cluster of important firms announcing earnings more-or-less simultaneously in either the pre-open or post-close period. Each quarter the authors identify the three most impressive clusters for the morning and afternoon. On the days leading up to post-close clusters, the market performs spectacularly (daily returns 17x the norm), delivering most of its excess return for the entire year on just a dozen days, without excess volatility, leading to extraordinary Sharpe ratios. The individual stocks whose earnings are to be announced perform even better than the market as a whole, but by themselves explain only a tiny fraction of the market surge.

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