Apr

23

an illustration of momentumTo what extent is there momentum in the surprise of quarterly earnings reports and is it reflected in similar moves in individual stocks or stock markets?

Steve Ellison writes:

I studied the impact of earnings by comparing the movements of the S&P 500 during the second half of the first month of each calendar quarter, when the market receives much new information about earnings, with the subsequent 2½-month period in which there is much less earnings news. For 2003 through 2009, I found a negative correlation with a t stat of -2.18. Interestingly, when I repeated the same test with 1990s data, I got a positive correlation with a t stat of +2.11 — changing cycles, again.

Philip J. McDonnell comments:

I would conjecture the Sarbanes Oxley Act of 2002 may be the line of demarcation between positive and negative correlation.


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  1. Steve Leslie on April 26, 2010 9:46 pm

    I feel that Dr Hersh Shefrin discusses addresses such issues in his book. Beyond Greed and Fear understanding behavioral finance and is his book that I strongly recommend as a reference in this area.

    Surprisingly, I also suggest William O'Neil who addresses these issues in his writings. This is how his system helped me to do well in stock investing.

    Dr. Ric Miller has one of the great online newsletters available. In my trading days I followed him closely and I benefitted greatly from his recommendations. All of these address the issues of the significance in accelerating earning and the relationship to rising stock prices.

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