Why Are Earnings Announcements So Important to Traders and Investors?

John Shon, Ph.D. and Ping Zhou, Ph.D.

In the United States, publicly-traded companies are required by the Securities and Exchange Commission (SEC) to publicly report their financial performance each quarter. The formal quarterly reports submitted to the SEC are called the 10-Q reports. However, most companies officially announce their quarterly performance numbers weeks before the 10-Q reports are due to be submitted. Because earnings per share, or EPS, is a key metric in the announcements, these announcements are generally referred to as earnings announcements.

Quarterly earnings announcement are important because they are the most salient, most anticipated, regularly-recurring ...