The share is down 8% after the profit warning, is it time to buy?

Variables explaining the market response to a profit warning are of interest toboth market participants and the managers of the firm. Several variables havebeen used in previous research to explain the market response to profit warnings10 with varying outcomes. This study uses a framework of surprise and risk toexplain the market response and tests it on a sample of 474 profit warningscollected from Nasdaq OMX Nordic. The findings show that surprise and riskvariables can be used to estimate the size of the market response to a profitwarning.