Download or read book The Stock Price Effects of Changes in Dispersion of Investor Beliefs during Earnings Announcements written by Lynn L. Rees and published by . This book was released on 2008 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Existing research provides competing theories as to how dispersion of investor beliefs might affect stock prices. We measure changes in dispersion of investor beliefs around earnings announcements using changes in the dispersion of individual analysts' forecasts. We find that the three-day market response to earnings announcements is negatively associated with changes in dispersion, consistent with the cost of capital hypothesis. The results hold after controlling for the current earnings surprise, forecast revisions of future earnings, and reported earnings relative to various earnings thresholds. Our study provides new insight about the information contained within earnings announcements that is incremental to the magnitude and timing of cash flows.

Download or read book The Impact of Discretionary Segment Reporting Behavior on Investor Beliefs and Stock Prices written by Joseph David Piotroski and published by . This book was released on 1999 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dispersion of Beliefs Stock Prices and the Earnings Surprise Measures A Generalized Approach written by Leon Zolotoy and published by . This book was released on 2009 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper we address the issue of modelling the relation between the stock prices and accounting earnings in the presence of potential divergence of opinions regarding the earnings data generating process among the investors. In our model the market's earnings expectation is defined as the weighted average of both the time-series and analysts' forecasts, with the weights being estimated directly from stock returns. No assumptions are made on the functional form of the earnings surprise-stock returns relation, which makes our model flexible enough to incorporate a variety of models discussed in the previous literature. The model is estimated semiparametrically following Hardle et. al [Annals of Statistics, 1993]. Our key findings are as follows. First, we find that investors use both the time-series and analysts' forecasts to predict future earnings. Second, the proportion of investors using the time-series (analysts) forecasts is significantly higher (lower) for the stocks with low market capitalization. Third, we find that accounting for the dispersion of earnings forecasts leads to a substantial increase in the magnitude of the post-earnings announcement drift.

Download or read book Trading Volume and Different Aspects of Disagreement Coincident with Earnings Announcements written by Linda Smith Bamber and published by . This book was released on 2000 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the association between disagreement coincident with earnings announcements and investors' trading decisions. Theory suggests that trading volume arises because of investor disagreement, but disagreement is a multi-faceted construct. We find that three distinctlydifferent aspects of disagreement each play an incremental role in explaining trading volume around earnings announcements, even after controlling for the magnitude of the contemporaneous price change. These aspects of disagreement are: dispersion in prior beliefs, divergence in beliefs, and belief jumbling. Dispersion in prior beliefs is the cross-sectional variation in expectations before the earnings announcement, divergence in beliefs is the change in the dispersion in beliefs, and belief jumbling occurs when investors' beliefs change positions relative to each other. Our results indicate that each of these three aspects of disagreement coincident with earnings announcements affects investors' real economic (i.e., trading) decisions.

Download or read book Expectations and the Structure of Share Prices written by John G. Cragg and published by University of Chicago Press. This book was released on 2009-05-15 with total page 185 pages. Available in PDF, EPUB and Kindle. Book excerpt: John G. Cragg and Burton G. Malkiel collected detailed forecasts of professional investors concerning the growth of 175 companies and use this information to examine the impact of such forecasts on the market evaluations of the companies and to test and extend traditional models of how stock market values are determined.

Download or read book The More We Know About Fundamentals the Less We Agree on Price written by Lindsey A. Gallo and published by . This book was released on 2017 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: Can an earnings announcement decrease disagreement about fundamentals while simultaneously increasing disagreement about price? Recent theory suggests the presence of short-horizon investors can lead to a polarization of higher-order beliefs about price (i.e., beliefs regarding the opinions of other investors), even as a public announcement reduces disagreement about fundamentals. Using analyst forecast dispersion and implied volatility to proxy for differences of opinion about fundamentals and price, respectively, I find a positive association between the presence of speculative traders and both the likelihood and extent of divergence between changes in price disagreement and earnings disagreement around earnings announcements characterized by decreasing forecast dispersion. Further, using abnormal announcement period volume to measure disagreement about price, I continue to document a positive association between speculation and the extent of divergence. Taken together, these results suggest that higher-order beliefs play an important role in assessing the informativeness of earnings announcements.

Download or read book Stock Price Reaction to Quarterly Earnings Announcements with Respect of Outlook Changes and Deviation to Consensus Forecast written by Benjamin Schmitt and published by . This book was released on 2015-06-12 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bachelor Thesis from the year 2008 in the subject Business economics - Investment and Finance, grade: 1.1, EBS European Business School gGmbH (Finance), language: English, abstract: Many authors have already studied about stock price reactions after earnings announcements yet, which is because of the importance of earnings announcements, in particular quarterly earnings announcements, for many investors. However, all major studies concerning this topic deal with long-term scenarios, the stock's price performance is measured for a time period of at least three quarters. Due to the fact that there are many investors, especially institutional investors such as hedge funds that trade stocks much more frequently, the existing studies are not relevant for them. This paper studies stock price reactions around quarterly earnings announcements for companies listed in Deutscher Aktienindex (DAX) or Midcap DAX (MDAX) with respect to changes of the company's full-year outlook and of earnings surprise regarding analyst consensus forecast within ten days before and after the announcement date. Hence, this paper aims to analyse short-term reaction to quarterly earnings announcements, which are of relevance for all investors, whose investment strategy is, at least partially, focussing on the short-term performance. The main target group of this analysis are therefore hedge funds and investors that run short-term strategies. Due to the fact that the widespread Event Study Methodology is focused on the long-term, it is irrelevant for this analysis.

Download or read book Issues in Accounting Administration and Corporate Governance 2011 Edition written by and published by ScholarlyEditions. This book was released on 2012-01-09 with total page 317 pages. Available in PDF, EPUB and Kindle. Book excerpt: Issues in Accounting, Administration, and Corporate Governance: 2011 Edition is a ScholarlyEditions™ eBook that delivers timely, authoritative, and comprehensive information about Accounting, Administration, and Corporate Governance. The editors have built Issues in Accounting, Administration, and Corporate Governance: 2011 Edition on the vast information databases of ScholarlyNews.™ You can expect the information about Accounting, Administration, and Corporate Governance in this eBook to be deeper than what you can access anywhere else, as well as consistently reliable, authoritative, informed, and relevant. The content of Issues in Accounting, Administration, and Corporate Governance: 2011 Edition has been produced by the world’s leading scientists, engineers, analysts, research institutions, and companies. All of the content is from peer-reviewed sources, and all of it is written, assembled, and edited by the editors at ScholarlyEditions™ and available exclusively from us. You now have a source you can cite with authority, confidence, and credibility. More information is available at http://www.ScholarlyEditions.com/.

Download or read book Responses in Divergence of Opinion to Earnings Announcement written by Fanglin Shen and published by . This book was released on 2013 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: The basic asset pricing model is developed under the presumption of homogeneous beliefs; However, Miller (1977) puts forward heterogeneous beliefs along with other early studies. His appealing theoretical verbal model suggests that rather than reflecting the average expectation of all market participants, stock prices reflect the valuation set by the most optimistic investors due to the differences of opinion and short-sales constraints. He predicts the convergence of divergent opinions over time "primarily because the passage of time often resolves certain uncertainties about the future of a company" (Miller 1977, p. 1155). Among the prior empirical studies which provide mixed evidence of Miller hypothesis, the most recent study by Berkman et al. (2009) endeavors to document the negative relationship between excess returns and differences of opinion in a three-day window around earnings announcements when there are binding short-sales constraints. Yet to date there has been little empirical research investigating how divergent opinions affect asset prices of foreign stocks. This dissertation takes a step in this direction. Using the American Depositary Receipts sample, we adopt an event study methodology and use multivariate regressions to examine the host-market response in divergent opinions to the earnings announcements. Overlooked by prior literature, asymmetric reactions to good and bad earnings surprises are allowed in the study. Country-level factors from home market are introduced with firms-characteristic factors to capture the cross-sectional excess returns in the presence of belief dispersion and host-market short-sales constraints. Our sample contains 553 ADRs with 13378 firm-quarter observations from 52 countries. Results from regression analysis show that consistent with Miller hypothesis, quarterly earnings announcements indeed help reduce opinion divergence in ADRs by documenting the negative relation between differences of opinions and excess quarterly earnings announcement returns. Our findings are robust when controlling the financial leverage, illiquidity, analyst forecasts, post-earnings announcement drift and price momentum. Moreover, we find investors do process information asymmetrically based on good and bad earnings shocks when use TURN as the DIVOPN proxy. We observe the price divergence when good earnings are released. Non-news group and bad news group experience the same price convergence. However, we do not find the positive relation between host-market short-sales constraints and excess earnings announcement period returns, even conditioning on home-market short-sales restriction. Last, we include the enforcement of insider trading law, legal origin, investor protection, rating on accounting standard and short-selling feasibility from home market into our baseline model. These home-market country-level factors do not account for our findings.

Download or read book Do Stock Price Bubbles Influence Corporate Investment written by Simon Gilchrist and published by . This book was released on 2004 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: Building on recent developments in behavioral asset pricing, we develop a model in which dispersion of investor beliefs under short-selling constraints drives a firm's stock price above its fundamental value. Managers optimally respond to the stock market bubble by issuing new equity. The bubble reduces the user-cost of capital and increase real investment. Using the variance of analysts' earnings forecasts as a proxy for the dispersion of investor beliefs, we find strong empirical support for the model's key prediction that increases in dispersion cause increases in new equity issuance, Tobin's Q, and real investment.

Download or read book Effect of Investor Sentiment on the Stock Market Reaction to Earnings News written by David Folsom and published by . This book was released on 2015 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we examine the effect of investor sentiment on the stock market reaction to earnings news (i.e., the earnings response coefficient or ERC) for loss firms. We find that the ERC for loss firms' earnings increases is less positive as sentiment increases, contrary to the findings in prior literature examining how sentiment affects the ERC for profit firms. Cross-sectional analysis reveals that the dampened ERC associated with earnings increases in loss firms during high sentiment periods is driven by various firm characteristics including low book values of equity, low R&D intensity, the inability to raise external capital, and a lack of nonrecurring write-offs. We also examine future returns and find that, on average, the effect of sentiment on loss firms' earnings changes reverses in the second year following an earnings announcement.

Download or read book The Relation between Dispersion in Analysts Forecasts and Stock Returns written by Shuping Chen and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the conclusion in Diether, Malloy, and Scherbina (2002) that dispersion in analysts' forecasts proxies for differences in investor beliefs, and that prices reflect the beliefs of optimistic investors when dispersion is high. If this is the case, we expect to find higher earnings response coefficients (ERCs), related to negative earnings surprises, for high versus low dispersion firms. This follows because the negative earnings surprises are less consistent with the beliefs of optimists. However, we find smaller ERCs, which calls into question the optimism argument in DMS. Further, we find that the relatively low future returns earned by high forecast dispersion firms, documented in DMS, are explained by the well known post-earnings-announcement drift phenomena. Specifically, after sorting observations based on prior period standardized unexpected earnings (SUEs), which are associated with drift, the difference between the future returns of high versus low dispersion firms is not statistically significant.

Download or read book Financial Analysts Earnings Forecast Dispersion and Intraday Stock Price Variability Around Quarterly Earnings Announcements written by Gerald J. Lobo and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the relationship between the dispersion of analysts' earnings forecasts and stock price variability around quarterly earnings announcements. Consistent with theoretical predictions, the empirical analysis shows that stock price variability at the time of earnings announcements is positively related to the degree of analysts' earnings forecast dispersion. The analysis also demonstrates that stock price variability is significantly greater from two days before to two days after the earnings announcement for firms ranked in the bottom third on the basis of analysts' forecast dispersion, whereas it is significantly greater from eight days prior to five days following the earnings announcement for firms in the top third. These results suggest that there is information about the earnings announcement that becomes available to at least a subset of investors prior to the earnings release. The increased level of price variability for five days following the earnings announcement suggests that market participants take different amounts of time to process the information conveyed by the earnings announcement.

Download or read book Financial Gatekeepers written by Yasuyuki Fuchita and published by Brookings Institution Press. This book was released on 2007-02-01 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Brookings Institution Press and Nomura Institute of Capital Markets Research publication Developed country capital markets have devised a set of institutions and actors to help provide investors with timely and accurate information they need to make informed investment decisions. These actors have become known as "financial gatekeepers" and include auditors, financial analysts, and credit rating agencies. Corporate financial reporting scandals in the United States and elsewhere in recent years, however, have called into question the sufficiency of the legal framework governing these gatekeepers. Policymakers have since responded by imposing a series of new obligations, restrictions, and punishments—all with the purpose of strengthening investor confidence in these important actors. Financial Gatekeepers provides an in-depth look at these new frameworks, especially in the United States and Japan. How have they worked? Are further refinements appropriate? These are among the questions addressed in this timely and important volume. Contributors include Leslie Boni (University of New Mexico), Barry Bosworth (Brookings Institution), Tomoo Inoue (Seikei University), Zoe-Vonna Palmrose (University of Southern California), Frank Partnoy (University of San Diego School of Law), George Perry (Brookings Institution), Justin Pettit (UBS), Paul Stevens (Investment Company Institute), Peter Wallison (American Enterprise Institute).

Download or read book Earnings Quality written by Jennifer Francis and published by Now Publishers Inc. This book was released on 2008 with total page 97 pages. Available in PDF, EPUB and Kindle. Book excerpt: This review lays out a research perspective on earnings quality. We provide an overview of alternative definitions and measures of earnings quality and a discussion of research design choices encountered in earnings quality research. Throughout, we focus on a capital markets setting, as opposed, for example, to a contracting or stewardship setting. Our reason for this choice stems from the view that the capital market uses of accounting information are fundamental, in the sense of providing a basis for other uses, such as stewardship. Because resource allocations are ex ante decisions while contracting/stewardship assessments are ex post evaluations of outcomes, evidence on whether, how and to what degree earnings quality influences capital market resource allocation decisions is fundamental to understanding why and how accounting matters to investors and others, including those charged with stewardship responsibilities. Demonstrating a link between earnings quality and, for example, the costs of equity and debt capital implies a basic economic role in capital allocation decisions for accounting information; this role has only recently been documented in the accounting literature. We focus on how the precision of financial information in capturing one or more underlying valuation-relevant constructs affects the assessment and use of that information by capital market participants. We emphasize that the choice of constructs to be measured is typically contextual. Our main focus is on the precision of earnings, which we view as a summary indicator of the overall quality of financial reporting. Our intent in discussing research that evaluates the capital market effects of earnings quality is both to stimulate further research in this area and to encourage research on related topics, including, for example, the role of earnings quality in contracting and stewardship.

Download or read book The Handbook of Equity Market Anomalies written by Leonard Zacks and published by John Wiley & Sons. This book was released on 2011-08-24 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Investment pioneer Len Zacks presents the latest academic research on how to beat the market using equity anomalies The Handbook of Equity Market Anomalies organizes and summarizes research carried out by hundreds of finance and accounting professors over the last twenty years to identify and measure equity market inefficiencies and provides self-directed individual investors with a framework for incorporating the results of this research into their own investment processes. Edited by Len Zacks, CEO of Zacks Investment Research, and written by leading professors who have performed groundbreaking research on specific anomalies, this book succinctly summarizes the most important anomalies that savvy investors have used for decades to beat the market. Some of the anomalies addressed include the accrual anomaly, net stock anomalies, fundamental anomalies, estimate revisions, changes in and levels of broker recommendations, earnings-per-share surprises, insider trading, price momentum and technical analysis, value and size anomalies, and several seasonal anomalies. This reliable resource also provides insights on how to best use the various anomalies in both market neutral and in long investor portfolios. A treasure trove of investment research and wisdom, the book will save you literally thousands of hours by distilling the essence of twenty years of academic research into eleven clear chapters and providing the framework and conviction to develop market-beating strategies. Strips the academic jargon from the research and highlights the actual returns generated by the anomalies, and documented in the academic literature Provides a theoretical framework within which to understand the concepts of risk adjusted returns and market inefficiencies Anomalies are selected by Len Zacks, a pioneer in the field of investing As the founder of Zacks Investment Research, Len Zacks pioneered the concept of the earnings-per-share surprise in 1982 and developed the Zacks Rank, one of the first anomaly-based stock selection tools. Today, his firm manages U.S. equities for individual and institutional investors and provides investment software and investment data to all types of investors. Now, with his new book, he shows you what it takes to build a quant process to outperform an index based on academically documented market inefficiencies and anomalies.

Download or read book Handbook Of Financial Econometrics Mathematics Statistics And Machine Learning In 4 Volumes written by Cheng Few Lee and published by World Scientific. This book was released on 2020-07-30 with total page 5053 pages. Available in PDF, EPUB and Kindle. Book excerpt: This four-volume handbook covers important concepts and tools used in the fields of financial econometrics, mathematics, statistics, and machine learning. Econometric methods have been applied in asset pricing, corporate finance, international finance, options and futures, risk management, and in stress testing for financial institutions. This handbook discusses a variety of econometric methods, including single equation multiple regression, simultaneous equation regression, and panel data analysis, among others. It also covers statistical distributions, such as the binomial and log normal distributions, in light of their applications to portfolio theory and asset management in addition to their use in research regarding options and futures contracts.In both theory and methodology, we need to rely upon mathematics, which includes linear algebra, geometry, differential equations, Stochastic differential equation (Ito calculus), optimization, constrained optimization, and others. These forms of mathematics have been used to derive capital market line, security market line (capital asset pricing model), option pricing model, portfolio analysis, and others.In recent times, an increased importance has been given to computer technology in financial research. Different computer languages and programming techniques are important tools for empirical research in finance. Hence, simulation, machine learning, big data, and financial payments are explored in this handbook.Led by Distinguished Professor Cheng Few Lee from Rutgers University, this multi-volume work integrates theoretical, methodological, and practical issues based on his years of academic and industry experience.