Market Measures

Market Influence

| Feb 25, 2015
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    Market Measures

    Market Influence

    Feb 25, 2015

    We have often looked at how an underlying will behave after an earnings announcement. However, how often is the movement in the underlying related to the earnings report and how often is it influenced by the direction of the market?

    Today, Tom Sosnoff and Tony Battista look at a huge study to answer this question. The segment presents two unique studies to analyze the movement of stocks around earnings announcements and the relation they have to the general market.

    The dataset for this study utilizes all the stocks in the tastylive watchlist, dating back to 2003 (where data was available). This yields 1,068 total occurrences, a sizeable dataset. The first study looks at 1-month moves after earnings dates and then buckets them by year. These bucketed moves were then compared to the annual move in the S&P 500 index (SPX) to see if the general market direction had any impact on the moves of stocks around earnings announcements.

    The results definitely show some overall connection between the moves of the stocks and the overall market. From 2003 to present, 2008 was the only negative year with 2011 being flat. These two years were the only two with average negative returns in the earnings occurrences.

    In the second study, the same 1,068 occurrences were analyzed but instead of looking at annual moves in the S&P 500, the team looked at the exact same one-month time frame as each individual earnings announcement. As a broad observation the team found that a stock, one month after earnings, was up 54% of the time, which we would expect given positive drift in the market. The study also shows that of the occurrences where the underlying was up, the market was also up 64% of the time.

    This number is 61% for down moves in the underlyings and the market.

    This video and its content are provided solely by tastylive, Inc. (“tastylive”) and are for informational and educational purposes only. tastylive was previously known as tastytrade, Inc. (“tastytrade”). This video and its content were created prior to the legal name change of tastylive. As a result, this video may reference tastytrade, its prior legal name.

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