This research paper investigates whether corporate earnings announcements trigger jumps in stock prices, as predicted by efficient markets theory. The study addresses the practical challenge of testing this hypothesis, which requires analyzing noisy high-frequency data from after-hours markets where most earnings announcements occur. Using a unique dataset and a newly developed microstructure noise-robust jump test, the authors provide compelling evidence that earnings announcements almost always induce jumps in the stock prices of announcing firms.

The paper makes several important contributions beyond confirming the basic hypothesis. It demonstrates that earnings announcements significantly increase the probability of price co-jumps in non-announcing firms and the broader market, suggesting spillover effects of earnings information. Furthermore, the analysis of returns from a post-announcement trading strategy reveals that price formation has been consistent with market efficiency since 2016. These findings provide strong empirical support for the efficient markets hypothesis regarding how markets incorporate large bundles of public information from earnings announcements, while also offering methodological innovations for analyzing high-frequency financial data in noisy trading environments.