Market responses to unexpected earnings of

The presence of a predictable share price response to a surprise in announcedearnings by listed companies has been documented in US equity markets since1968. This research investigated whether the presence of a positive or negativeearnings surprise for companies listed on the JSE Securities Exchange resultedin an equivalent predictable share price response.The research was conducted on a sample of 112 companies listed on the JSESecurities Exchange between the period 1 February 2001 and 8 August 2007.The study analysed share price responses to 946 earnings surprise events overthe three-day trading window around the actual earnings announcement date.Sell-side analyst earnings forecasts as published on INET Bridge were used asa proxy for the earnings expected by the market at the time of the companyearnings announcement.The results of the event study showed a weakly positive share price response toa positive earnings surprise, the presence of which was not sustained once afew extreme values were excluded from the sample. The event study results fornegative earnings surprises were more conclusive in showing no predictablesignificant share price response.