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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