What do stocks tend to do after reporting earnings?
One might think that it depends entirely on the name; that investors reach an unstated consensus ahead of the event, and as the actual results and guidance come in, stocks rise and fall with equal frequency. But that's not what Goldman Sachs' options research desk found.
Armed with an analysis of 19 years' worth of data, Goldman found that stocks not only tend to rise off of earnings, but also beat the broader market in the process. (Tweet This)
"We estimate the average stock in our study was up 0.7 percent and outperformed the S&P 500 by 0.4 percent in the five days around earnings," Goldman wrote in a Wednesday note.
That may not sound like much, but the persistent use of an options strategy would have produced some quite nice gains.
"Call buying produced an average profit of 14 percent (before transaction costs) and was profitable in all 19 years," from 1996 to 2015, Goldman wrote.