Topic：Comparing with the Average:Reference Points and Market Reactions to Above-Average Earnings Surprises
Presenter：Wen He, associate professor, Queensland University, Australia
Time：March 10, 2017（Friday） 10：00 - 11:30
Venue：Room 205, Jiageng Bld 2
Abstract：We investigate a new reference point in financial markets. Specifically, we examine investors’ use of the average earnings surprise as a reference point to classify earnings news into good or bad news. We find that in the short window around earnings announcements, the market rewards a price premium to firms with above-average earnings surprises. The price premium is larger when investors are more likely to be subject to cognitive constraints in processing information. We also find that firms announcing above-average earnings surprises exhibit a greater abnormal trading volume, consistent with the notion that beating reference points prompts investors to trade.