Prediction of Stock Market Post-Earnings Announcement

Prediction of Stock Market Post-Earnings Announcement

Problem Identification:

         The majority of the prices fluctuation in the stock market is attributed to the earnings release four times a year. Often on the following day of 10-Q, the stocks of these companies make significant moves either up or down resulting from the surprising gap between the consensus of analyst estimates and the actual earnings amounts. Given the very short window of reaction time following the earnings announcement, it is difficult to capitalize on either bullish or bearish earnings. In this group project, we endeavor to make trading recommendations for the day following the release of earnings reports by tapping into publicly available stock data.

Value Opportunity:

        Accurate prediction of the market's direction can help investors to gain enormous profits with small amount of capital for individual or institutional investors alike. In addition to the price speculative activities, institutional investors may also discover value in risk management purposes.

Data Collection:

Data for S&P 500 stocks are gathered for the period of time between Jan. 1st, 2010 to Apr. 1st 2016 and stored in structured databases. For each stock, we collect stock volume, open and close stock value and high and low, extracted from public available sources such as www.google.com/finance and finance.yahoo.com. As for historical earnings reports, we are going to resort to Bloomberg to fetch the EPS, estimated EPS, market capitalization, etc.

Plan:

Given the very short window of reaction time following the earnings announcement, it is difficult to capitalize on either bullish or bearish earnings. In this group project, we endeavor to make trading recommendations for the day following the release of earnings reports by tapping into publicly available stock data.