Earnings Announcements and Stock Returns – An Event Study of the Norwegian Stock Market

Abstract

This master’s thesis is an event study concerning earnings announcements in the Norwegian stock market between 2018 and 2020. The purpose of this study is to test the efficient market hypothesis proposed by Eugene Fama on the Norwegian stock market, and we want to test exactly how firms in the Norwegian market react to earnings announcements. Several studies have been done regarding how the market in various countries reacts to earnings announcements, but few studies have been done on the Norwegian market. Previous research has used both event studies and difference-in-difference methods to observe the actual impact of the markets reacting to earnings announcements. In our thesis, we conducted an event study to see if the market reacted efficiently to the earnings announcements, deviating from the expected values. We also performed a difference-in-difference analysis to observe how much impact an earnings announcement had on a company`s return compared to companies that hadn't released any announcement. Our thesis showed that the Norwegian market seemingly acts efficient to earnings announcements under ordinary market conditions, but that it`s harder to estimate the observed market reactions in periods with high market volatility, such as in 2020. We also showed that in periods with high volatility, the market seemingly values other factors more highly, which causes less observed effect from the release of earnings announcements.