ML-Based Trading Strategy for Short-Term Price Reactions on Earnings Announcement Reports

An earnings announcement report (EAR) contains the latest information about a company’s financial situation and operating performance. Short-term stock price reacts strongly to such information. In this paper, to gain investment return from the short-term price reaction to EARs, we use 28 important variables from EARs and propose an ML-based trading strategy (MLTS) with random forest (RF). Results show that our strategy achieves the highest final investment return of 178.1%.