Earnings season

The period, running roughly a month each quarter, in which the majority of listed companies in a market report their results for the quarter just finished. It exists because reporting deadlines are tied to a common financial calendar, so filings bunch. In the United States the convention is that the large banks report first, about two weeks after the quarter end, and the bulk of the index follows over the next month.

Each company sets and publishes its own reporting date in advance, and data vendors collect those dates into a calendar alongside the consensus estimate, which is a survey of analysts rather than an official number. Results in the United States are usually released before the opening bell or after the closing bell rather than during the session, precisely so the market has time to read them.

That release convention is what most often catches people out. A share whose result lands outside exchange hours can reopen at a price some distance from the previous close, with no continuous quotation in between, so a level between the two was never available to trade at. A second point is that the reaction follows the surprise against consensus and the guidance for the coming period, not the direction of profit: a rise that falls short of the estimate and a fall that beats it have both been followed by the reaction the headline would not suggest.

Index-level effects follow from the same weeks. When companies making up a large share of an index report within days of each other, the index inherits the dispersion of their results, and implied volatility on the index commonly rises into the window and falls once it has passed.