This paper aims to illustrate the different patterns of the effects, attributed to quarterly earnings announcement, among grouped stocks daily returns. The empirical study finds that, in Chinese A-share markets, the release of corporate earnings indeed produce significant abnormal returns, which are not captured by the Fama-French five factor model . It is worth noting that the group membership of stocks in the sample are data-determined, relying on an iterative algorithm called PLS from Su(2016), which impose penalty on the heterogeneous coefficients of market risk factor.
Asset pricing; Cluster analysis; heterogenous coefficients; Factor models; Chinese A-share markets