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Short run reaction to news announcements: UK evidence

Tucker, Jon; Guermat, Cherif; Prasert, Santhita


Cherif Guermat

Santhita Prasert


In this paper we aim to investigate the behaviour of returns around corporate news announcements. The motivation of the paper is that neither the broad classification of news into “good” and “bad” in many previous studies, nor the focus on only one news announcement type such as earnings announcements, allows us to determine whether returns patterns are in general consistent with efficient markets explanations or behavioural finance models. We study a unique dataset of more than 8,000 news announcements collected for 100 UK companies over a period of 10 years. We compute both daily and cumulative abnormal returns over a 27 day event window to enable the observation not only of event day returns reactions but also pre- and post-event day returns. The results reveal that corporate events convey important economic information to investors. One interesting implication of this is an aggregated holistic approach towards firm events may not be appropriate. Some of the evidence found in this paper is not consistent with the efficient market expectations. Asymmetric reaction, sluggishness, over and underreaction, and leakage are found in many types of news announcements.

Journal Article Type Article
Publication Date Aug 1, 2013
Journal Studia Oeconomica
Print ISSN 1220-0506
Peer Reviewed Peer Reviewed
Volume 58
Issue 2
Pages 41-71
APA6 Citation Tucker, J., Guermat, C., & Prasert, S. (2013). Short run reaction to news announcements: UK evidence
Keywords news announcements, abnormal returns, event study
Publisher URL


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