The Structure of Information Release and the Factor Structure of Returns

74 Pages Posted: 12 May 2016 Last revised: 14 Feb 2017

See all articles by Thomas Gilbert

Thomas Gilbert

University of Washington - Department of Finance and Business Economics

Christopher M. Hrdlicka

University of Washington - Michael G. Foster School of Business

Avraham Kamara

University of Washington - Michael G. Foster School of Business

Date Written: February 13, 2017

Abstract

We model how firms releasing information on different dates causes the CAPM to fail, requiring an additional factor based on the information structure to price assets. We exemplify this mechanism's empirical relevance using quarterly earnings announcements, which cluster across months along size and book-to-market. Seventy percent of the alpha reduction from including SMB and HML occurs in the four main earnings announcement months. The information structure factor accounts for all of SMB and HML's seasonal alpha reduction and one third of their overall alpha reduction. Controlling for size and book-to-market, exposures to SMB and HML vary with firms' earnings announcement month.

Keywords: Earnings Announcements, CAPM, Factor Models, SMB, HML

JEL Classification: G12

Suggested Citation

Gilbert, Thomas and Hrdlicka, Christopher M. and Kamara, Avraham, The Structure of Information Release and the Factor Structure of Returns (February 13, 2017). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2778824 or http://dx.doi.org/10.2139/ssrn.2778824

Thomas Gilbert (Contact Author)

University of Washington - Department of Finance and Business Economics ( email )

Box 353200
Seattle, WA 98195
United States
206-616-7184 (Phone)

HOME PAGE: http://faculty.washington.edu/gilbertt/

Christopher M. Hrdlicka

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195
United States
206.616.0332 (Phone)
206.542.7472 (Fax)

Avraham Kamara

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States
206-543-0652 (Phone)
206-221-6856 (Fax)

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