One of the most important regulations concerning firms on the stock exchange is the mandatory publication of quarterly reports (earnings). These reports have similar function as the yearly financial statements, except they are simplified. All data in the reports must be real in terms of accounting standards. The aim is to show the public how much profit (or loss) the company has achieved in the period of 3 months, and what are the predictions for the upcoming quarter. The forecasts can influence the price of the share to a great extent.

Earnings are published on a predetermined date. Firms also indicate whether the announcement is going to happen before the stock exchange opens, during its operations, or after the day closing. Sometimes companies even communicate the precise time of the publication within the opening hours of the stock exchange.

The most important data in the report is the net profit. Before announcement, an expected value is calculated based on the objectives of the firm and on the estimations of several market analysts. The difference between the expected and the actual value may result dramatic changes in the market price of shares, based on how well the company could achieve its goals and execute its plans in the quarter. Many business analysts can also predict whether companies are going to meet their short-term goals. Therefore, unexpected changes can happen even before the publication of the report. When prices start moving rapidly in one direction, many investors may think this movement is going to be a significant trend. Because of that, they will follow the direction of the market, further increasing the price change. This situation is called herd behaviour, and it can be an alarming event for all investors. If the news is found to be fake, these investors will leave their positions suddenly, resulting the prices to change drastically in the other direction. This phenomenon can happen repeatedly, causing huge fluctuations in the price.

The earnings can be handled easily – just like the fundamental items – because only those shares can cause problems, which are announced during opening hours. Because people know this information in advance, they will not trade on that day or will handle the shares even more cautiously than usual.