How the Equity Market Responds to Unanticipated Events

Raymond M. Brooks, Ajay Patel, Tie Su

Research output: Contribution to journalArticle

48 Scopus citations

Abstract

We examine the market reaction of prices, volume, spreads, and trading location when firms experience events that are totally unanticipated by the equity market in terms of both timing and content. We find that the response time is longer than previous studies have reported. Selling pressure, wider spreads, and higher volume remain significant for over an hour. We also find an immediate price reaction for overnight events; however, the market takes longer to react to events that occur when it is open. These findings may shed light on the efficacy of trading halts.

Original languageEnglish (US)
Pages (from-to)109-133
Number of pages25
JournalJournal of Business
Volume76
Issue number1
DOIs
StatePublished - Jan 1 2003

ASJC Scopus subject areas

  • Business and International Management
  • Economics and Econometrics
  • Statistics, Probability and Uncertainty

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