Studies indicate that stocks of firms with the best earnings news outperform the stocks of firms with the worst earnings news for at least six months. What type of market anomaly is this?

Question

Quizplus · Accepted Answer

This is the earnings announcement puzzle, which is the phenomenon where stocks of firms with the best earnings news perform better than stocks of firms with the worst earnings news for an extended period of time. This contradicts efficient market theory, which suggests that all public information should be immediately reflected in stock prices.

Studies Indicate That Stocks of Firms with the Best Earnings