Jennifer Dunn

Date of Award

Spring 2019

Degree Name

Bachelor of Science (BS)

Advisor(s)

Robert Kissell

Abstract

When additional information is released regarding a company, investors adjust their perceived value of the company to reflect the new information through the buying and selling of their stock. When the earnings are released each quarter, investors will react to the difference between the earnings they expected and the earnings that the company released. In previous studies, researchers have found that the order imbalance for a stock has had a positive correlation to the surprise in earnings which could indicate that some investors have additional information regarding the company or there is a significant number of random orders placed within the market. I have found that this previous research has neglected to emphasize the impact that the overall market has upon securities. The purpose of this study was to analyze the relationship between order imbalances prior to earnings and surprise earnings when market impact is isolated for companies within the Russell 1000 and Russell 2000 for eight consecutive quarters between January 2017 and January 2019. Through my study I concluded that while there were some significant relationships between the order imbalances prior to earnings and log returns and/or the earnings surprises, there is not significant research to support that these are long-lasting relationships which concurs with prior research in the field.

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