Earnings announcement premia and the limits to arbitrage

Daniel A. Cohen, Aiyesha Dey, Thomas Z. Lys, Shyam V. Sunder

Research output: Contribution to journalArticlepeer-review

72 Scopus citations


We examine the factors underlying the presence of earnings announcement premia. We find that the premia persist beyond the sample period examined in prior studies (ending in 1988), although they decline in magnitude after 1988. Further, premia are lower on the expected than the actual earnings announcement dates. We document that increases in voluntary disclosures result in lower premia, despite the increase in return volatility over time. Finally, our evidence suggests that the premia are not completely eliminated because of the costs of arbitrage.

Original languageEnglish (US)
Pages (from-to)153-180
Number of pages28
JournalJournal of Accounting and Economics
Issue number2-3
StatePublished - Jul 2007
Externally publishedYes

Bibliographical note

Funding Information:
A previous version of this paper was titled: “Blinded by the light: Are earnings announcements worth the risk?” We would like to thank Yonca Ertimur, Thomas Dyckman, Tom Fields, Emre Karaoglu, Rick Mendenhall, Margaret Neale, Craig Nichols, Doug Skinner (the editor), Linda Vincent, an anonymous referee and seminar participants at the 2004 meetings of the American Accounting Association, Columbia University, Cornell University, the Massachusetts Institute of Technology, the University of Illinois at Chicago, the University of Southern California, and the Zell Brown Bag Seminar Series at the Kellogg School for helpful comments on previous drafts. Financial support from the Zell Center for Risk Research at the Kellogg School is gratefully acknowledged. All remaining errors are our own responsibility.


  • Announcement premium
  • Disclosure
  • Earnings announcements
  • Limits to arbitrage
  • Preannouncements


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