Why earnings move the price so much

Four times a year every listed company publishes its accounts, and in the four days around that publication, on average, around a third of that stock's entire annual price movement gets concentrated. It isn't that the event creates uncertainty: it resolves it all at once.

How much of the annual movement fits into four days

Roughly a third, per research cited by the National Bureau of Economic Research (NBER), the leading US economic research body. Four days out of two hundred and fifty trading days concentrate a share of the movement their weight in the calendar doesn't explain.

That imbalance is why this chapter exists and why it's the longest in the course.

Think of it proportionally. Four days are 1.6% of the trading year. If movement were spread evenly, those four days should carry 1.6% of the total. They carry twenty times more.

What this means for long-term investors. It might look like this only matters to short-term traders, and it's the reverse. Hold a stock for years and you'll pass through sixteen, twenty, or forty of these events. Understanding what happens in them isn't a trading technique: it's understanding where much of what happens to your investment gets decided.

And why it's called a "season"

The events aren't spread across the year: they cluster into four windows of about six weeks each, starting shortly after each calendar quarter closes. Hence the name.

The opening is fairly ritual and always the same: the large banks report first, in the second week of the month, and the rest follow by sector. Banks going first isn't accidental — their accounting close is faster, and their results give a first read on the state of the economy that the rest of the market uses as a reference.

Two practical consequences of this clustering.

Companies compete for attention. On the busiest days dozens report at once, and smaller ones pass without anyone looking closely. That doesn't make them better or worse, but it does explain why their reactions can be sharper: fewer eyes on them, fewer people on the other side.

Not all follow the calendar year. A company can close its fiscal year in January, June, or September, so its "first quarter results" land in different months from everyone else's. It's common in retail and technology, and it's why some companies appear to report off-schedule.

Why the event concentrates so much movement

Because for three months the market operates on estimates, and at one specific instant those estimates get replaced by verified facts. It isn't that more uncertainty arrives: it's that the existing uncertainty disappears.

The information vacuum between quarters

Between one release and the next, about ninety days pass in which nobody outside knows exactly how the company is doing. There are clues — sector data, competitor commentary, analyst reports — but no verified figures.

During that stretch the price moves on hypotheses. Each participant has their own estimate of what's happening inside, and the price is the equilibrium point between all those hypotheses.

When the real numbers arrive, all those hypotheses resolve at once. The wrong ones have to correct in minutes rather than weeks, and that simultaneous correction is the movement you see.

Why this isn't the same as any other news

Unexpected news — a lawsuit, a factory fire, a regulatory change — also moves the price. The difference with an earnings event is twofold.

It's on the calendar. You know it's coming weeks in advance. That means the market prepares: positions get adjusted in the preceding days, risks get hedged, protection gets bought, and all of that leaves measurable traces before anything is published. The session on what the options market is saying before the announcement is entirely about those traces.

It covers everything at once. It isn't information about one aspect of the business: it's revenue, margins, debt, guidance, and management commentary in the same moment. A single event simultaneously resolves dozens of open questions.

What actually gets published, and in what order

This explains a lot of what follows: it isn't one thing being published, it's three, at three different moments. And each can move the price independently.

One: the press release

The short document, two to ten pages, with the headline figures and some quotes from the chief executive. It's what the media turns into a headline within seconds.

It contains just enough to know whether estimates were beaten, and almost never the detail explaining why.

Two: the regulatory filing

In the United States it's the 8-K form and, a few days later, the full quarterly report. In Spain, the material information filing to the CNMV (Comisión Nacional del Mercado de Valores, the Spanish securities regulator) with the financial statements. It's longer, more tedious, and far more complete.

Here sits what the press release summarised: the segment breakdown, the accounting notes, the updated risks. It's public and free — in the US it downloads from EDGAR, the database of the SEC (Securities and Exchange Commission) — and practically nobody opens it.

Three: the call

Thirty to sixty minutes later comes the earnings call, and it deserves its own section because it's where much of the interesting part happens.

Timeline of an eventT+0 → T+60 min

And each one can move the price on its own.

The call gets its own section: it is where much of the interesting part happens.

T+0Press releaseT+0 · and days laterRegulatory filingT+30 – 60 minThe callPRICE

Why the earnings call is a second event

Because it contributes information that isn't in the press release, and because the market reacts to it measurably and independently. Anyone looking only at the published figures misses half the event.

What the research says

Work by Matsumoto, Pronk and Roelofsen on the information content of these calls found that most of the price movement during a call happens during the Q&A, not during management's prepared presentation.

That makes sense on reflection: the presentation is written, legally reviewed, and rehearsed. The Q&A isn't. That's where an analyst presses on the point the company would rather not develop, and where the tone of the answer says things the script doesn't.

A later study by Price, Doran, Peterson and Bliss, published in the Journal of Banking & Finance, measured this precisely: the call's linguistic tone predicts abnormal returns and volume incrementally to the press release. Meaning it carries information the published figures didn't contain.

The most interesting detail, and the most uncomfortable

NBER work on management tone in these calls found an asymmetry worth knowing.

When management's tone is excessively negative, that predicts future earnings problems fairly strongly. When it's excessively positive, it predicts considerably less.

But the market reacts in reverse: it responds faster to enthusiasm than to concern. The consequence is that after a call with a worrying tone, the price keeps drifting downward for days after the initial reaction, because the initial reaction fell short.

That phenomenon — price continuing to move for days after an event in the same direction — has its own name and appears in how to read a full event, start to finish, this chapter's final session.

What to do with this in practice

Calls are public. Anyone can listen live from the company's website, and transcripts get published shortly after.

The problem isn't access: it's that they run an hour, happen on US hours — the middle of the night in Spain — and there are dozens each week during the season. Listening to one call is perfectly feasible; listening to the calls of every company you care about, every quarter, isn't. That's the real gap, and it isn't one of knowledge but of available hours.

Before the open or after the close

Almost no company reports during regular market hours. They pick one of two moments — just before the open or just after the close — and that choice completely changes when you see the price's real first reaction.

Why nobody reports mid-session

We saw in the previous chapter that slippage and spread spike at moments of peak volatility. Reporting mid-session would force everyone to react in real time, with orders filling far from the expected price.

Reporting outside regular hours gives several hours for the information to be digested before the bulk of orders cross.

The two windows, and what changes

Before the open, usually between 6:00 and 9:00 AM in New York. The first reaction shows up in pre-market trading, and the regular session opens with that reaction already baked in from the first second.

After the close, usually between 4:00 and 6:00 PM. The first reaction happens in after-hours trading, with far fewer people trading, and doesn't fully get absorbed until the next day's open.

That difference matters for reading an event. If you follow an after-close release and only look at that day's closing price, you aren't seeing the reaction: the reaction happened afterwards, and it can still change before the next open, because the call is still to come and the night is long.

The logistical detail that trips people up most

The exact date isn't always confirmed. A company can announce weeks ahead that it will report "in late October" and only confirm the specific day one or two weeks out. Until that confirmation, what appears on any calendar is an estimate, and estimates move.

And there's a practical gap there that costs money. Preparing to read an event on the wrong day is wasted work, and worse: finding out a company reported last night when you already see the price moved this morning means arriving late to something that was on the calendar.

Telling a company-confirmed date from a data-provider estimate is precisely one of Volatly's background jobs: the calendar gets reconciled nightly against the authoritative source, and every event carries a marker for whether its confirmed date genuinely is confirmed or still an estimate. It's unglamorous and it prevents the silliest error of all.

What to remember

• Around a third of a stock's annual movement concentrates in four days, twenty times more than their weight in the calendar would explain.
• The event doesn't create uncertainty: it resolves three months of hypotheses at once.
• It isn't one publication but three: press release, regulatory filing, and call, at three different moments.
• Most of the movement during the call happens in the Q&A, not in the prepared presentation.

Related: what every trade really costs you · the dividend, start to finish · what the options market is saying before the announcement