Download or read book Robust Measures of Earnings Surprises written by Chin-Han Chiang and published by . This book was released on 2018 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: Event studies of market efficiency measure an earnings surprise with the consensus error (CE), defined as earnings minus the average of professional forecasts. If a subset of forecasts can be biased, the ideal but difficult to estimate parameter-dependent alternative to CE is a nonlinear filter of individual errors that adjusts for bias. We show that CE is a poor parameter-free approximation for this ideal measure. The fraction of misses on the same side FOM, by discarding the magnitude of misses, offers a far better approximation. FOM performs particularly well against CE in predicting the returns of US stocks, where bias is potentially large, than that of international stocks.
Download or read book An Examination of the systematic Post announcement Drift Anomaly Employing a Relative Measure of Earnings Surprises written by Myung Chul Chung and published by . This book was released on 1991 with total page 316 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Differential Persistence of Extremely Negative and Positive Earnings Surprises written by Joshua Livnat and published by . This book was released on 2008 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: Consistent with prior studies, this study shows that extremely negative and extremely positive earnings surprises in the fourth quarter have lower levels of persistence than those in the first through third fiscal quarters. Furthermore, extremely negative earnings surprises in the fourth fiscal quarter have lower levels of persistence than extremely positive earnings surprises in that quarter.Similar to the patterns of persistence, the post-earnings-announcement drift in prices is declining through the four quarters of the fiscal year, with the smallest drift occurring after the announcement of the fourth fiscal quarter. The drift after the fourth quarter is virtually nonexistent for extremely negative earnings surprises and smaller than extremely positive surprises, in line with the differential persistence of these surprises. The combined evidence in the study is consistent with investors who under-react to extreme earnings surprises because they seek further information. When the new information confirms the initial surprise, prices move in the same direction, creating a drift. The results of the study are robust to earnings surprises based on time-series properties of earnings or analyst forecasts.
Download or read book A Temporal Analysis of Earnings Surprises written by Lawrence D. Brown and published by . This book was released on 2014 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: I show that the median earnings surprise has shifted rightward from small negative (miss analyst estimates by a small amount) to zero (meet analyst estimates exactly) to small positive (beat analyst estimates by a small amount) during the 16 years, 1984 to 1999. I show that a rightward temporal shift in median surprise from negative to positive describes earnings, but neither profits nor losses. Median profit surprise shifts within the positive quadrant, from zero to one cent per share. Median loss surprise shifts within the negative quadrant from extreme negative (about -33 cents per share) to zero. I show that the median surprise for profits exceeds that for losses in every year. I document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses, but I find a greater frequency of profits that either meet or beat analyst estimates in every year. I find a significant positive temporal trend in positive profits that are 'a little bit of good news,' and a significant negative temporal trend in managers who report losses that are an 'extreme amount of bad news.' My results are robust to the four internal validity threats I consider - namely temporal changes in: (1) analyst forecast accuracy, (2) the mix of earnings of one sign preceded by earnings of another sign four quarters ago, (3) the timeliness of the most recent analyst forecast, and (4) the I/B/E/S definition of actual earnings. I find that managers of growth firms are relatively more likely than managers of value firms to report good news profits. I show that when they do report positive profit surprises, managers of growth firms are more likely to report 'a little bit of good news' in every year.
Download or read book Stock Market Liquidity written by François-Serge Lhabitant and published by John Wiley & Sons. This book was released on 2008-01-09 with total page 502 pages. Available in PDF, EPUB and Kindle. Book excerpt: Brings together today's best financial minds across the world to discuss the issue of liquidity in today's markets. It is often proxied by trade-based measures (such as trading volume, frequency of trading, dollar value of shares trade, etc), order based measures and price impact measures.
Download or read book Streaks in Earnings Surprises and the Cross section of Stock Returns written by Roger Loh and published by . This book was released on 2013 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The gambler's fallacy (Rabin, 2002) predicts that trends bias investor expectations. Consistent with this prediction, we find that investors underreact to streaks of consecutive earnings surprises with the same sign. When the most recent earnings surprise extends a streak, post-earnings announcement drift is strong and significant. In contrast, the drift is negligible following the termination of a streak. Indeed, streaks explain about half of the post-earnings announcement drift in our sample. Our results are robust to more general definitions of trends than streaks and a battery of control variables including the magnitude of earnings surprises and their autocorrelation. Overall, post-earnings announcement drift has a significant time-series component that is consistent with the gambler's fallacy.
Download or read book Using Market Reaction to Infer Persistence of Earnings Surprises written by Gia Chevis and published by . This book was released on 2008 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We measure the market's assessment of the information in a particular earnings surprise by calculating a firm- and time-specific earnings response coefficient (FTERC). We use the FTERC to infer the market's expectation of the persistence of unexpected earnings and also develop an interpretive framework. Examining the market's response to a particular earnings surprise - rather than whether it, on average, over- or underreacts - allows researchers to use the FTERC as a dependent variable (e.g. in a study of disclosure quality) or as a control when each response is unique (e.g. a firm before, during and after fraud). Our model implies seven classifications of expected persistence: growing, permanent, decaying, transitory, partially offsetting, offsetting, and subsuming. We find that approximately 1 in 4 earnings announcements results in an FTERC within the 'normal' permanent-to-transitory range; over 70% of expectation revisions are growing or subsuming.
Download or read book Attention to Market Information and Underreaction to Earnings on Market Moving Days written by Badrinath Kottimukkalur and published by . This book was released on 2019 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Post-earnings announcement drift is stronger in firms that release earnings on days when market returns are higher in magnitude. This drift remains robust after controlling for previously documented factors such as Friday releases, the number of simultaneous releases, and price delay measure. Negative earnings surprises drive this drift, and the drift is more pronounced among small stocks, value stocks, and stocks that have low analyst following. Slower analyst response to earnings contributes to the drift. These findings are consistent with investors paying more attention to market information and less attention to firm-specific information due to attention constraints.
Download or read book Earnings Announcements are Full of Surprises written by Runeet Kishore and published by . This book was released on 2008 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the drift in returns of portfolios formed on the basis of the stock price reaction around earnings announcements. The Earnings Announcement Return (EAR) captures the market reaction to unexpected information contained in the company's earnings release. Besides the actual earnings news, this includes unexpected information about sales, margins, investment, and other less tangible information communicated round the earnings announcement. A strategy that buys and sells companies sorted on EAR produces an average abnormal return of 7.55% per year, 1.3%more than a strategy based on the traditional measure of earnings surprise, SUE. The post earnings announcement drift for EAR strategy is stronger than post earnings announcement drift for SUE. More importantly, unlike SUE, the EAR strategy returns do not show a reversal after 3 quarters. The EAR and SUE strategies appear to be independent of each other. A strategy that exploits both pieces of information generates abnormal returns of about 12.5% on an annual basis.
Download or read book Post Earnings Announcement Drift written by Joshua Livnat and published by . This book was released on 2008 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study explores an additional factor that is associated with differential levels of the post-earnings-announcement drift (henceforth drift) - the contemporaneous surprise in revenues. Consistent with prior evidence about greater persistence of revenues and greater noise caused by heterogeneity of expenses, this study shows that the earnings drift is stronger when the revenue surprise is in the same direction as the earnings surprise. Moreover, the study provides direct evidence that the drift is stronger when the earnings persistence is greater. The results are robust to various controls, including the proportions of stock held by institutional investors, trading liquidity, and arbitrage risk.
Download or read book Analyst Information Precision and Small Earnings Surprises written by Sanjay Bissessur and published by . This book was released on 2017 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study proposes and tests an alternative to the extant earnings management explanation for zero and small positive earnings surprises (i.e., analyst forecast errors). We argue that analysts' ability to strategically induce slight pessimism in earnings forecasts varies with the precision of their information. Accordingly, we predict that the probability that a firm reports a small positive instead of a small negative earnings surprise is negatively related to earnings forecast uncertainty and present evidence consistent with this prediction. Our findings have important implications for the earnings management interpretation of the asymmetry around zero in the frequency distribution of earnings surprises. We demonstrate how empirically controlling for earnings forecast uncertainty can materially change inferences in studies that employ the incidence of zero and small positive earnings surprises to categorize firms as “suspect” of managing earnings.
Download or read book Predictability of Aggregate Earnings written by Aydin Uysal and published by . This book was released on 2013 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, I provide evidence that aggregate earnings are predictable based on the cointegration relation between earnings and cash flows implied by the accounting identity that earnings is the sum of the cash flows and the accruals. I first show that earnings and cash flows follow random walks with drifts while accruals is stationary with zero mean. I then show that earnings and cash flows are cointegrated and the cointegration error is the accruals. I finally show that earnings is the error correction term in this cointegration relation, hence predictable. My results which are robust to various financial statement frequencies, earnings measures, universes, and periods may help to answer some of the questions which were raised regarding to the contemporaneous relationship between aggregate earnings surprises and stock returns in the recent literature.
Download or read book 107 2 Hearings Accounting Reform and Investor Protection S Hrg 107 948 Vol 1 February 12 14 26 and 27 2002 written by and published by . This book was released on 2003 with total page 524 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Accounting Reform and Investor Protection written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs and published by . This book was released on 2003 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Accounting Reform and Investor Protection without special title written by United States. Congress. Senate. Committee on Banking, Housing, and Urban Affairs and published by . This book was released on 2003 with total page 520 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Implied Volatility Functions written by Bernard Dumas and published by . This book was released on 1996 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: Abstract: Black and Scholes (1973) implied volatilities tend to be systematically related to the option's exercise price and time to expiration. Derman and Kani (1994), Dupire (1994), and Rubinstein (1994) attribute this behavior to the fact that the Black-Scholes constant volatility assumption is violated in practice. These authors hypothesize that the volatility of the underlying asset's return is a deterministic function of the asset price and time and develop the deterministic volatility function (DVF) option valuation model, which has the potential of fitting the observed cross-section of option prices exactly. Using a sample of S & P 500 index options during the period June 1988 through December 1993, we evaluate the economic significance of the implied deterministic volatility function by examining the predictive and hedging performance of the DV option valuation model. We find that its performance is worse than that of an ad hoc Black-Scholes model with variable implied volatilities.
Download or read book Portfolio Construction Measurement and Efficiency written by John B. Guerard, Jr. and published by Springer. This book was released on 2016-09-23 with total page 480 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume, inspired by and dedicated to the work of pioneering investment analyst, Jack Treynor, addresses the issues of portfolio risk and return and how investment portfolios are measured. In a career spanning over fifty years, the primary questions addressed by Jack Treynor were: Is there an observable risk-return trade-off? How can stock selection models be integrated with risk models to enhance client returns? Do managed portfolios earn positive, and statistically significant, excess returns and can mutual fund managers time the market? Since the publication of a pair of seminal Harvard Business Review articles in the mid-1960’s, Jack Treynor has developed thinking that has greatly influenced security selection, portfolio construction and measurement, and market efficiency. Key publications addressed such topics as the Capital Asset Pricing Model and stock selection modeling and integration with risk models. Treynor also served as editor of the Financial Analysts Journal, through which he wrote many columns across a wide spectrum of topics. This volume showcases original essays by leading researchers and practitioners exploring the topics that have interested Treynor while applying the most current methodologies. Such topics include the origins of portfolio theory, market timing, and portfolio construction in equity markets. The result not only reinforces Treynor’s lasting contributions to the field but suggests new areas for research and analysis.
