How much attention do you pay to earnings season? For years I basically ignored it as it was too close to “news” for my liking. I’ve changed my tune in recent years after doing some research on earnings announcements and how they affect some of my trading strategies. For some of my models there was no effect but on others, especially some of my gap models, the effect was pretty strong – enough to start incorporating some logic to modify them.
One thing that’s always struck me about earnings season is that unlike a hunting season when there’s a defined start and end date, there is no general consensus on when earnings season starts and finishes. The other surprising thing about earnings is just how much the frequency of earnings announcements changes throughout the year. Here’s a chart for the distribution of announcements. The differences are pretty staggering.
Once I realized that earnings were worth looking at for some of my models, I now incorporate them into what I do and it’s one of the things I look at for each new model I research. In fact, I now try to schedule my vacations around earnings seasons.
How much do you use earnings announcements in your trading? Do you ignore earnings or is it a vital part of your trading edge? I’m interested to hear what you think.