Earnings announcements and Intraday Volatility -a study of Nasdaq OMX Stockholm

Abstract

In this study, we investigate how the trading and its corresponding volatility appear after the release of financial reports. The focus is whether financial reports released on trading time appears to have a higher volatility relative to reports released off trading time; this makes the efficient market theory developed by Fama (1970) a cornerstone throughout this study. We investigate the volatility at the immediate time window (first 15 minutes) after earnings announcements are released, using the Realized Volatility approach. The study aims at investigating all companies and all trades listed on the Nasdaq OMX Stockholm Stock Exchange. Two different data sets are used, namely a Tick Time Data set and a Minute Data set. The results regarding Tick Time Data supports the assumption that the volatility is higher on average for reports released on trading time compared to reports released off trading time. For our Minute Data set the inclusion of overnight return violates the assumption, whereas by excluding the overnight return, the volatility after reports released on trading seem to be higher throughout this study with just a few quarterly exceptions.