There is a paper by Engelberg, McClean, and Pontiff called “Anomalies and News”.

The full paper is worth reading, but the summary is that they find that “anomaly” returns are seven times higher on earnings announcement days and 2 times higher on corporate news days. In total they look at 97 (!) anomalies that have been documented in peer-reviewed papers using data from 1979 to 2013 (the anomalies are detailed in another paper by McClean and Pontiff, “Does academic research destroy stock return predictability?“) but a (very) non-exhaustive list includes:

• The Fama/French factors of market capitalization and value
• Low beta
• Profitability
• Yield
• Insider buying

The magnification of the returns applies to both longs and shorts, and don’t seem to be the result of data snooping.

They also document another effect: analysts tend to underestimate the returns to stocks that the anomalies suggest are good (e.g., value, small cap, etc.) and overestimate the returns for shorts (e.g., growth and large cap stocks). This is another reason to expect these effects to persist into the future.

Often investors think that they should avoid times where there is clear risk. Earnings are an example for individual stocks, and Federal Reserve announcements would be a case that applies to indices and bonds. This is wrong. We get paid for risk and these days are the best to be in stocks.

If you want to harvest a risk premium, you need to take risk.

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