Future binary events, or catalysts, can have a significant impact on the short and long term performance of companies affected by those events. The effect of these catalysts is most notable in the healthcare sector. An event such as clinical trial data or an FDA approval decision can determine the future value of a key product that a company is developing, thus affecting a company’s stock price. Because many of these market moving catalysts are foreseeable, there is an opportunity for traders and investors to take advantage of these catalysts if the timing and magnitude can be understood to a degree above that of the typical market participant.

It was the purpose of this study to better understand the magnitude of catalysts in the biotechnology and pharmaceutical sector by quantifying the stock moves of the companies affected by these catalysts, as well as provide a starting point for discussion of various investment and trading strategies around these stock moves.

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