Abstract
This study aims to evaluate the market reaction to the earnings, case in Indonesia Stock Exchange. It is expected that many uninformed and irrational trading happen around earnings announcement. Many studies suggest that the reason behind these biases is an impact of under reaction and/or overreaction of investors’ behaviour. We examined market reaction and also examined the investors’ trading behaviour; categorized by foreign and domestic investors. The findings are divided into type of earnings announcement, stocks with negative earnings announcements showed no abnormal returns around announcement day. Conversely, stocks with earnings announcement that have positive surprise showed the existence of abnormal activities around announcement day measured by significant cumulative abnormal returns (CAR). In this condition foreign investors have propensity to buy the stock after the announcement, in contrast domestic investors do the opposite behaviourand they tend to sell the stocks.
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