Abstract
The vast majority of U.S. public firms announce earnings in the post-close (between the closing bell and midnight, or PC) or the pre-open (between midnight and the opening bell, or PO). Prior literature generally treats PC and PO announcements as equivalent when measuring the market reaction to the announcement. In this study, we provide a model of investor processing of earnings announcements and hypothesize that PO announcements have a slower market reaction to the earnings news than PC announcements. This differential speed of the market reaction is because PC announcements offer investors more time to process and trade on the earnings news before regular trading begins. We find strong empirical evidence that, although the earnings news and cumulative market reaction does not differ between PC and PO announcements, PO announcements incorporate earnings news more slowly in the days after the announcement than PC announcements.
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