Robert H. Litzenberger, O. Maurice Joy, Charles P. Jones, Ordinal Predictions and the Selection of Common Stocks, The Journal of Financial and Quantitative Analysis, Vol. 6, No. 4 (Sep., 1971), pp. 1059-1068

The purpose of this paper is to reexamine Reinganum's study which indicates that abnormal returns could not be earned unexpected quarterly earnings information, and to document precisely the response of stock prices to earnings announcements. This study, using a very large sample of stocks and daily returns, represents the most complete and detailed analysis of quarterly earnings reports that has been performed to date. Our results are contrary to those of Reinganum and show that abnormal returns could have been earned almost any time during the 1970's. Our analysis also indicates that risk adjustments matter little in this type of work. Finally, we find that roughly 50% of the adjustment of stock returns to unexpected quarterly earnings occurs over a 90-day period after the earnings are announced.