This study examines the impact of advance disclosures before earnings announcements on share prices, disclosure rates for negative and positive news, and the response of AI-related stocks. It focuses on the large volume of information that moves the market before formal announcements.
As the third-quarter earnings season approaches, advance earnings disclosures issued by companies before their formal earnings announcements are becoming increasingly important drivers of share prices. Markets often revise expectations when new information emerges rather than waiting for the earnings date.
According to the study, approximately 80% or more of share-price movements occur during the period before earnings announcements, while the impact over the three-day period spanning the formal announcement is said to be less than 20%. The response of AI-related stocks can be particularly severe when results fall below expectations.
Advance earnings disclosures more often contain negative news, with an average of 93.4% of disclosures being released as negative information. By contrast, disclosure of positive news remains at around 49% on average, suggesting that significant upside is often held back until the formal announcement.
Even advance disclosures in line with market expectations can leave risks in the details of the outlook. Even when the midpoint matches market expectations, uncertainty may remain in areas such as the sales mix and profit margins, warranting caution.
In this context, advance earnings disclosures have become a factor in sharp share-price declines and a source of investor risk awareness even before the start of earnings season.