Stock price reaction to profit warnings: the role of time-varying betas

Yin, Shuxing; Mazouz, Khelifa; Benamraoui, Abdelhafid; Saadouni, Brahim

doi:10.1007/s11156-017-0623-3

Cited by 10 publications

(8 citation statements)

References 51 publications

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“…First, it studies a new emerging market, whereas most previous studies have focused on developed countries. Our study contributes, therefore, to closing the research gap, particularly since our results are consistent with prior literature (Yin et al, 2018;Lui et al, 2013). Second, emerging markets have provided empirical results with similar criteria to those of developed markets, which allows the researchers to compare the results in developing markets with developed markets.…”

Section: Introductionsupporting

confidence: 91%

“…Attracting investors is deemed to be an important issue for firms seeking to increase their capital in order to extend their investments and dominate the market. Prior studies indicate that differences in stock prices are more noticeable when timed around important news declarations (Yin et al, 2018). In addition, Lui et al (2013) found that the organized risk of individual stocks responds disproportionately to the good and bad news included within the predictor reports.…”

Section: Introductionmentioning

confidence: 99%

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Profit warning and its association with stock price informativeness: experimental analysis

Almasarwah¹,

Almaharmeh²,

Omush³

et al. 2020

JOIC

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Purpose This study investigates the nature of the association between profit warnings and stock price informativeness in the context of Jordan as an emerging country. Design/methodology/approach The authors used a large panel data set that related to stock price synchronicity and profit warnings percentages on the Amman Stock Exchange for the period spanning 2007–2018. Robust regression was used as a parametric test. This enabled us to obtain stronger results that fall in line with our prediction that a profit warning encourages firm investors to collect and process more firm-specific information than common market information. Findings Our findings show a significant positive effect of profit warnings on the amount of firm-specific information incorporated into stock price, which means that the greater the percentage of profit warnings the more likely that more firm-specific information will be incorporated in stock price synchronicity. In addition, corporate governance characteristics (moderating variables) significantly increase the level of the relationship between profit warnings and stock price synchronicity. Practical implications Our study results could be useful to investors, senior managers, and regulators in Jordanian firms, particularly in relation to decisions about enhancing the quality of financial statements. In addition, our results provide new evidence about the consequences of earnings announcements for information content and the informativeness of stock prices. Our methodology and evaluation of profit warnings may also demonstrate useful evidence for future researchers on profit warnings and stock price informativeness in developing economies, especially given that such evidence is scarce in developing economies. Originality/value This research is the first study of its kind on emerging markets, particularly in the Middle East. Moreover, entering the corporate governance variables as moderating variables to the robust regression was found to be more powerful than other regressions.

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Section: Introductionsupporting

confidence: 91%

Section: Introductionmentioning

confidence: 99%

Profit warning and its association with stock price informativeness: experimental analysis

Almasarwah¹,

Almaharmeh²,

Omush³

et al. 2020

JOIC

View full text Add to dashboard Cite

show abstract

“…Empirical evidences also demonstrate use of event study to gauge the reaction of the stock price behaviour with respect to positive or negative the announcement. Yin et al (2018) analysed the role of time varying betas, event induced variance and conditional heteroskedasticity in the estimation of abnormal return around important news announcements. On the basis of 1,238 positive and 485 negative profit warnings by listed companies in Hong Kong Stock Exchange, they found presence of price reversal patterns following both positive and negative warnings.…”

Section: Review and Literaturementioning

confidence: 99%

“…Return of the market in the period t The significant value of t-test at 5 per cent level of significance shows Abnormal Returns are statistically significant from zero and fraud announcement events affect the stock price of concerned banks (Adnan et al, 2016;Chakrabarti et al, 2017;Yin et al, 2018).…”

Section: Event Studymentioning

confidence: 99%

Reaction of Stock Price to Frauds’ Announcements: Evidence from Indian Banking Sector

Sharma

Verma

2020

Asia-Pacific Journal of Management Research and Innovation

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This paper is an attempt to investigate the reaction of stock price of Indian banks with respect to announcements of frauds. The Event Study Methodology is used to examine the impact of frauds’ announcements to stock price of banks which experienced fraud. The fraud cases which exceed ₹1,000 crores are considered for the period from January 2014 to December 2018. The results indicate that the fraud announcements do affect the stock price of banks which experienced fraud. In majority of cases of frauds under consideration, the study found significant abnormal loss which further supported by the results of abnormal volume ratio. The highest abnormal loss is found in the stock price of Punjab National Bank (8.74 per cent) which involves the scam committed by the Nirav Modi. Due to increased frauds in the banking sector, the confidence of the investors adversely affects which may further lead to consequences on concerned banks. In this direction, the results of the study have importance for the policy makers and regulators for analysing the behaviour of stock price with respect to the announcements of frauds in the Indian banking sector.

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“…In particular, WTI behaved as the price setter before 2010, while Brent has played the leading role in the crude oil market since 2011 (Ji and Fan, 2015). In addition, following Yin et al (2018), we employ a paired ttest to measure whether there is a significant difference in DCC coefficients between crude oil futures markets without and with structural breaks. The results of the paired t-test shown in Table 6 provide evidence that the difference between the estimated mean values of conditional correlation coefficients is significant at the 1% level.…”

Section: Dynamic Conditional Correlations Without and With Structuralmentioning

confidence: 99%

Revisiting the Integration of China Into the World Crude Oil Market: The Role of Structural Breaks

et al. 2019

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The China's crude oil futures market (INE market), as it was first launched in late March of 2018, quickly draws much attention from global investors. In reference to the high frequency data, this research explores how well this new product reacts efficiently to international influences and to what extent it can be integrated with traditional benchmarks, such as WTI and Brent. The multivariate GARCH models are employed to capture the cross-market time-varying correlations, return and volatility spillovers, which are modified by incorporating the detected structural breaks in the return dynamics to improve the accuracy of model estimates. Empirical results indicate a strong integration of INE market with these international benchmarks. A high but time-varying correlation is observed with recurring highs around 0.7. Spillover effects have included significant bidirectional return and volatility spillovers between the INE and the international benchmark markets. Secondly, INE market appears to interact better with the Brent market than with the WTI market. Thirdly, structural breaks can influence correlations, the portfolio weights and hedge ratios. Lastly, the correlation between crude oil futures markets decreases significantly during the periods when structural breaks caused by economic and/or geopolitical events are identified. These findings have important implications in policy makings and economic decisions on portfolio management and hedging strategies.

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Stock price reaction to profit warnings: the role of time-varying betas

Cited by 10 publications

References 51 publications

Profit warning and its association with stock price informativeness: experimental analysis

Profit warning and its association with stock price informativeness: experimental analysis

Reaction of Stock Price to Frauds’ Announcements: Evidence from Indian Banking Sector

Revisiting the Integration of China Into the World Crude Oil Market: The Role of Structural Breaks

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