Abstract
This study examines the market responses to announcements of stocks with different trading activities that disclose earnings during and outside normal trading hours. For less actively traded stocks, when bad news is reported after the market closes, potential informed trading exists, along with heightened return reversals and market inefficiency before the release. These informed trading activities are partially responsible for the post-announcement preopening price adjustments. Although the after-release preopening period for inactive stocks does not significantly facilitate price discovery as much as for active stocks, it provides an environment to resolve order imbalances after overnight information.
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