Firm characteristics and jump dynamics in stock prices around earnings announcements

•Firm characteristics contribute to the jump dynamics in stock prices.•Firm size negatively associates with the occurrences of stock price jumps.•The past 12 months return volatility positively relate to future jump activities.•The evidence is compelling in both statistical and economic sense.•The r...

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Veröffentlicht in:The North American journal of economics and finance 2019-11, Vol.50, p.101003, Article 101003
Hauptverfasser: Zhou, Haigang, Zhu, John Qi
Format: Artikel
Sprache:eng
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Zusammenfassung:•Firm characteristics contribute to the jump dynamics in stock prices.•Firm size negatively associates with the occurrences of stock price jumps.•The past 12 months return volatility positively relate to future jump activities.•The evidence is compelling in both statistical and economic sense.•The results can survive a variety of robustness checks. We examine the contribution of firm characteristics to the cross sectional variations of jump dynamics in stock prices around a short window around earnings announcements. Using a snapshot approach to isolating the confounding effect of idiosyncratic informational shocks on triggering stock price discontinuities at daily frequency, we find firm-size, trading volume, turnover ratio, liquidity measures, and return volatility in both long-run and short-run all to be powerful determinants of jump activities both statistically and economically. For instance, we estimate a 38%–47% difference in the likelihood of jump occurrences between two otherwise identical firms whose log-sizes are two sample standard deviations apart. The results are robust to alternative model specifications, estimation methods, or sampling frequencies of the time series.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2019.101003