Download or read book Probability of Meeting beating Analysts Forecasts and Market Reaction to Earnings Announcements written by Mei Cheng and published by . This book was released on 2006 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Other Information as an Explanatory Factor for the Market Reactions to Firms Meeting Or Beating Analyst Forecasts written by Vincent Y. S. Chen and published by . This book was released on 2007 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: Although analyst forecasts are one of the most critical thresholds for setting the market's expectations, the meeting of analyst forecasts is not always followed by a positive market reaction. In this study, I find that the market reacts negatively to 41 percent of firms that meet or beat analyst forecasts and positively to 44 percent of firms that miss analyst forecasts. Intuitively, the seemingly counterintuitive market reactions to firms' meeting or beating analyst forecasts indicate that the market's expectations about a firm's future earnings is based not only on earnings but also on 'other information'. I estimate the content of 'other information' in analyst forecasts as a basis for the seemingly opposite direction of the market reactions and find that content to be an explanatory factor. Specifically, I find that the market values a firm's long-run growth, market risk, forecast precision, accounting loss, price decreases from the prior quarter and the past history of meeting or beating analyst forecasts when assessing the firm's meeting or beating analyst forecast expectations. I also find the evidence, however, that the market overestimates the persistence of the other information in analyst forecasts about future earnings. Overall, I find that the market does not functionally fixate on earnings when valuing firms' meeting or beating analyst forecasts. The consequences of capital market concerns of the meeting or beating analyst expectations seem to have been overemphasized.
Download or read book The Magnitude and Timing of Analyst Forecast Response to Quarterly Earnings Announcements written by Lise Newman Graham and published by . This book was released on 1993 with total page 334 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Trading on Corporate Earnings News written by John Shon and published by FT Press. This book was released on 2011-03-09 with total page 225 pages. Available in PDF, EPUB and Kindle. Book excerpt: Profit from earnings announcements, by taking targeted, short-term option positions explicitly timed to exploit them! Based on rigorous research and huge data sets, this book identifies the specific earnings-announcement trades most likely to yield profits, and teaches how to make these trades—in plain English, with real examples! Trading on Corporate Earnings News is the first practical, hands-on guide to profiting from earnings announcements. Writing for investors and traders at all experience levels, the authors show how to take targeted, short-term option positions that are explicitly timed to exploit the information in companies’ quarterly earnings announcements. They first present powerful findings of cutting-edge studies that have examined market reactions to quarterly earnings announcements, regularities of earnings surprises, and option trading around corporate events. Drawing on enormous data sets, they identify the types of earnings-announcement trades most likely to yield profits, based on the predictable impacts of variables such as firm size, visibility, past performance, analyst coverage, forecast dispersion, volatility, and the impact of restructurings and acquisitions. Next, they provide real examples of individual stocks–and, in some cases, conduct large sample tests–to guide investors in taking advantage of these documented regularities. Finally, they discuss crucial nuances and pitfalls that can powerfully impact performance.
Download or read book Meeting Individual Analyst Expectations written by Marcus Kirk and published by . This book was released on 2014 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: The expectations management literature has so far focused on firms meeting the analyst consensus forecast -- the expectations of analysts as a group -- at earnings announcements. In this study we argue that investors may use individual analyst forecasts as additional benchmarks in evaluating reported earnings because the consensus forecast underutilizes private information contained in individual analyst forecasts. We predict that measures reflecting such private information have incremental explanatory power over the consensus forecast for the market's reaction to earnings news. We find results consistent with this prediction by examining two measures: (1) the percentage of individual forecasts met and (2) meeting the key analyst forecast. We extend the literature by documenting the role of individual analyst forecasts in investors' evaluations of reported earnings.
Download or read book The Market s Assessment of the Probability of Meeting Or Beating the Consensus written by Guang Ma and published by . This book was released on 2015 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate to what extent the market uses information that is predictive of whether earnings will meet or beat the analyst consensus forecast of earnings (MBE henceforth): measures of a firm's incentives to engage in MBE behavior, measures of constraints on MBE, measures of past MBE practices by firm and industry, and other variables. Using the Mishkin test framework and Bonferroni-adjusted p-values, we document that of a total of 21 variables, the market inefficiently uses information in one difficulty measure and four other predictors, suggesting that strong empirically and theoretically grounded relationships concerning MBE behavior are more likely to be unraveled by the market. We further show that a portfolio based on the difference between the objective MBE probability and the market-assessed MBE probability generates significant abnormal returns. This return predictability is distinct from known sources of predictability and cannot be fully explained by arbitrage risk or transaction costs.
Download or read book Management s Incentives to Guide Analysts Forecasts written by Dawn A. Matsumoto and published by . This book was released on 1999 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recent reports in the popular press allege that managers guide analysts' forecasts downward to improve their chances of meeting or beating these forecasts when earnings are announced. Since the majority of this alleged guidance is unobservable, I use systematic patterns in analysts' forecast errors as a proxy for firm-provided guidance and examine both the change in guidance over time as well as the characteristics of firms exhibiting evidence of this guidance. The evidence is consistent with an increase in firm-provided guidance in recent years and differences across firms in the propensity to guide forecasts downward. In particular, I find: 1) an increasing number of forecast errors exactly equal to zero particularly for firms with initially high forecasts; 2) when firms miss analysts' expectations at the earnings announcement, the proportion that miss quot;highquot; (positive earnings surprise) versus miss quot;lowquot; (negative earnings surprise) has increased in recent years particularly for firms with initially high forecasts; 3) firms with higher growth prospects, higher institutional ownership, and higher litigation risk are more likely to guide analysts' forecasts downward to ensure reported earnings meet expectations at the earnings announcement, while firms with low value relevance of earnings are less likely to do so; and 4) firms with high institutional ownership and reliance on implicit claims with their stakeholders tend to exceed rather than fall short of expectations at the earnings announcement.
Download or read book Do Investors Fully Unravel Persistent Pessimism in Analysts Earnings Forecasts written by David Veenman and published by . This book was released on 2018 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study presents evidence suggesting that investors do not fully unravel predictable pessimism in sell-side analysts' earnings forecasts. We show that measures of prior consensus and individual analyst forecast pessimism are predictive of both the sign of firms' earnings surprises and the stock returns around earnings announcements. That is, we find that firms with a relatively high probability of forecast pessimism experience significantly higher announcement returns than those with a low probability. Importantly, we show these findings are driven by predictable pessimism in analysts' short-term forecasts as opposed to optimism in their longer-term forecasts. We further find that this mispricing is related to the difficulty investors have in identifying differences in expected forecast pessimism. Overall, we conclude that market prices do not fully reflect the conditional probability that a firm meets or beats earnings expectations as a result of analysts' pessimistically biased short-term forecasts.
Download or read book Analysts Forecasts as Proxies for Investor Beliefs in Empirical Research written by Jeffery S. Abarbanell and published by . This book was released on 1993 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Analysts on the Market Response to Earnings Announcements written by R. Christopher Small and published by . This book was released on 2016 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the effect analysts have on the price response to earnings announcements. To address this question, I exploit an exogenous shock to analyst coverage to show that, following the loss of an analyst, the market reaction to earnings announcements decreases. In cross-sectional analyses, I show that the magnitude of the negative effect is decreasing in information asymmetry and the likelihood that a firm’s earnings are used more for contracting purposes. I further show that the magnitude of the negative effect is increasing in the readability of the financial statements and financial reporting comparability. This study contributes to the literature by providing a deeper understanding of the effect analysts have on the pricing of information contained in earnings announcements. As such, the results of this study should be of interest to regulators, researchers, and investors.
Download or read book Program and Proceedings written by American Accounting Association and published by . This book was released on 2007 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Effect of Conference Calls on Analyst and Market Underreaction to Earnings Announcements written by Michael D. Kimbrough and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I extend prior research on the information content of conference calls by examining whether they accelerate analysts' and investors' responses to the future implications of currently announced earnings. I find that the initiation of conference calls is associated with a significant reduction in the serial correlation in analyst forecast errors, a measure of initial analyst underreaction. I also find that the initiation of conference calls is associated with significant reductions in two measures of initial investor underreaction: (1) post-earnings announcement drift and (2) the proportion of the total market reaction to firms' earnings announcements that is quot;delayedquot; (i.e. that is attributable to post-earnings announcement drift). The reduction in post-earnings announcement drift surrounding conference call initiation is concentrated in the set of sample firms where drift is most severe (i.e. the smallest, least heavily traded sample firms) while the largest, most heavily traded sample firms do not exhibit significant drift either before or after conference call initiation. Robustness tests, including analyses of matched samples of non-conference call firms, indicate that the results are not driven by general increases in analyst and investor sophistication over time or by contemporaneous increases in the information and trading environments of conference call initiators.
Download or read book Market Reaction to Earnings Announcements and Analyst Forecasts written by Andrei Vazhnov and published by . This book was released on 1997 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Analysts Incentives and Systematic Forecast Bias written by Senyo Y. Tse and published by . This book was released on 2008 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: The likelihood that earnings announcements meet or beat analyst expectations differs substantially and systematically across firms. Prior research explores managers incentives to meet analyst expectations. In this paper, we examine analysts incentives to issue systematically biased earnings forecasts and thereby influence the likelihood that firms report good earnings news. We first document that forecast biases are systematically different, as large firms and firms with low forecast dispersion - labeled high-information firms - are more likely to report positive earning surprises, while small firms and firms with large forecast dispersion - labeled low-information firms - tend to have optimistically biased forecasts that often lead to negative earnings surprises. We also show that potential financing needs induce more optimistic forecasts for low-information firms, but this effect is greatly mitigated for high-information firms. We find that career concerns help explain analysts' systematic forecast bias. An analyst's career longevity is enhanced by issuing pessimistic forecasts for high-information firms and optimistic forecasts for low-information firms. Optimistic forecast bias for high-financing-need firms has no consequence for an analyst's career longevity, but optimistic bias for low-financing-need firms hurts. Our results suggest that career concerns contribute to a systematic pattern of forecasting that aligns with managerial preferences.
Download or read book Analysts Forecasts as Earnings Expectations Classic Reprint written by Patricia C. O'brien and published by Forgotten Books. This book was released on 2016-12-06 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from Analysts' Forecasts as Earnings Expectations The use of predictions from univariate time-series models of earnings as earnings expectations has been more common than the use of analysts' forecasts, in part because of data availability However, several studies (brown and Rozeff Collins and Hopwood Fried and Givoly demonstrate that analysts are more accurate than univariate models, presumably because they can incorporate a broader information set than can a univariate model. Fried and Givoly also find that analysts' forecast errors are more closely associated with excess stock returns than are those of univariate models. An additional limitation of time - series models is their substantial data requirements, which impart a sample selection bias to the research, toward longer-lived and larger firms. Since analysts forecasts require no parameter estimation, sample selection bias is less severe. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Download or read book Market and Analyst Reactions to Earnings News written by Jing Liu and published by . This book was released on 2004 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study compares the efficiency with which the stock market and financial analysts react to corporate earnings announcements. Results show that the market is more efficient and reacts more rapidly to earnings news than financial analysts. In particular, in pre-announcement quarters (inclusive of announcement day), the market reacts more than analysts, and in post-announcement quarters, analysts gradually catch up. This result is robust across all measures of analyst earnings forecasts and under alternative specifications. Results further show that prior research reached the opposite conclusion because of two questionable research design choices: 1) limiting the window to the first post-announcement quarter (a window too narrow to capture market or analysts' complete reactions); and 2) consideration of just one-quarter-ahead earnings forecasts (an approach that ignores forecasts at other horizons).
Download or read book Investor Reaction to Celebrity Analysts written by Sarah E. Bonner and published by . This book was released on 2011 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the effects of analysts' celebrity on investor reaction to earnings forecast revisions. We measure celebrity as the quantity of media coverage analysts receive in sources included in the Dow Jones Interactive database, and find that media coverage is positively related to investor reaction to forecast revisions. The effect of celebrity on the reaction to forecast revisions remains significant after controlling for forecast performance variables examined in prior studies (ex post forecast accuracy, ex ante accuracy, award status, and other variables shown to be related to forecast accuracy). While these results are consistent with the familiarity of the analyst's name affecting the market reaction, we cannot rule out that our measure of celebrity is correlated with error in the performance measures we examine and/or correlated with other unexamined dimensions of forecast performance. A content analysis of a random subsample of the media coverage of our sample analysts suggests that our findings likely are not due to the increased availability of forecast revisions. Finally, an investigation of the excess returns around the quarterly earnings announcement date suggests that market participants react too strongly to forecast revisions issued by analysts with high levels of media coverage. Taken together, these findings suggest that an analyst's level of media coverage can affect the initial market reaction to his forecast revisions.
