Datta and Dhillon 571 Assuming that the standardized excess returns are cross-sectionally uncorre- lated,the appropriate statistic is (12) Z=VN(SMER,), which is approximately distributed unit normal.The Z-statistic for the cumulative excess returns over various intervals from t to t2 is (13) Z1.2 Z/V2-1+1 = IL. Results A.Bond and Stock Price Response to Unexpected Earnings Table 2,Panel A presents the bond and stock price response to unexpected earnings increase and decrease announcements when earnings precede dividends. For the increase announcements,the bond excess return on the announcement day is 1.00 percent,which is the largest one-day return over the entire 31-day event period.The Z-statistic is 9.38 and is significant at the 1-percent level.Eighty percent of the bonds have positive returns and the Z-statistics for the nonparametric sign test and Wilcoxon signed rank test are 5.62 and 6.09,respectively.Both are significant at the 1-percent level suggesting that the results are not driven by outliers and are robust to the distributional assumptions of bond returns.The cumulative preannouncement period return from day-29 to the day before the announcement is 0.15 percent and is not significant. The stock sample has an announcement day excess return of 1.02 percent with an accompanying Z-statistic of 6.85,which is significant at the 1-percent level.The sign test and Wilcoxon signed rank Z-statistics are 3.50 and 4.23,respectively,and again both are significant at the 1-percent level.The preannouncement period cumulative returns are not significant.These results show that earnings increase announcements convey positive information to both bond and stock markets. For the unexpected earnings decrease sample,the announcement day excess bond return is-1.70 percent with a Z-statistic of-15.69,which is significant at the 1-percent level.Only 9 percent of the bonds have positive returns.The accompa- nying Z-statistics of the sign test and the Wilcoxon signed rank test are-7.48 and -7.18,respectively,both being significant at the 1-percent level.Consistent with the earnings increase sample,there appears to be no significant preannouncement bond cumulative returns.The stock market,as expected,responds negatively with an excess return of-1.39 percent with a Z-statistic of-9.64,which is significant at the 1-percent level.For the stocks,32 percent of the observations have positive returns.The results of the nonparametric sign test and Wilcoxon signed rank test are significant at the 1-percent level. When earnings follow dividend announcements,the bond price reaction to earnings changes remains positive and significant.The results are presented in Table 2,Panel B.The bond price reaction for the announcement day is 1.56 percent with a Z-statistic of 8.52,and is significant at the 1-percent level.Eighty-seven