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Trading Tips

Some Numbers on Stock Market Earnings Reactions

I’m reading a book on trading based on company earnings announcements at the moment. I’ll post a review when I’m done, but there was something I wanted to share right away. It speaks to the question “Why didn’t the market rise on the positive news?” that comes up all the time (and which is among the questions answered in the Trading FAQs book). The book has a table in it showing how stocks have reacted to earnings surprises over I believe a 25-year period. It breaks down like this:

Positive Earnings Surprise
Market Rallies 60.55%
Market Falls 39.45%

Negative Earnings Surprise
Market Falls 61.05%
Market Rallies 38.95%

Good news isn’t always good news and bad news isn’t always bad news.

By John

Author of The Essentials of Trading

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