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Does Beta Move With News? Systematic Risk And Firm-Specific Information Flows

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Executive Summary

This paper studies time-varying patterns in the systematic risk (or beta) of individual stocks during firm-specific information flows. The authors show that systematic risk increases by an economically and statistically significant amount on news announcement days, before reverting to its average level two to five days later. The authors employ intra-daily data and recent advances in econometric theory to obtain firm-level estimates of daily changes in beta for all constituents of the S&P 500 index over the period 1995-2006, and estimate the behavior of beta around the dates of over 22,000 quarterly earnings announcements.

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