Bond and Stock Market Response to Unexpected Earnings Changes

Abstract

Rusanti, Ramadhani Lisa (2006). Bond and Stock Market Response to Unexpected Earning Changes. Yogyakarta. Management Department. Economic Faculty. Islamic University ofIndonesia. Thisresearch is intendedto study and examine whether bondand stock market react positively (negatively) to increases (decrease) earning changes. By adding bond rating, market index andcash dividend as the control variable, earning changes may give the information needed by bond andstockholder. Thus, they use this information topredict theirfuture returns. The results are significantfor the bondholder returns, but not for the stockholder's. It shows the evidence that bondholder react positively (negatively) to the earning changes increase (decrease) and alsofor the bond rating. But that result does not occur on stockholders. The stockholder's return only react positively (negatively) to market index and cash dividend increase (decreases). It does notgive anyreactionfor the earning changes.