Changes in Analysts' Information Around Earnings Announcements

Changes in Analysts' Information Around Earnings Announcements
Author: Orie E. Barron
Publisher:
Total Pages: 0
Release: 2002
Genre:
ISBN:

In this study we examine changes in the precision and the commonality of information contained in individual analysts' earnings forecasts, focusing on changes around earnings announcements. Using the empirical proxies suggested by the Barron et al. (1998) model that are based on the across-analyst correlation in forecast errors, we find that the commonality of information among active analysts significantly decreases around earnings announcements. We also find that the idiosyncratic information contained in these individual analysts' forecasts increases significantly immediately after earnings announcements, and this increase is more significant as more analysts revise their forecasts. These results are consistent with theories positing that an important role of accounting releases is to trigger the generation of idiosyncratic information by elite information processors such as financial analysts (Kim and Verrecchia 1994, 1997).

Earnings Announcement Disclosures and Changes in Analysts' Information

Earnings Announcement Disclosures and Changes in Analysts' Information
Author: Orie E. Barron
Publisher:
Total Pages: 45
Release: 2016
Genre:
ISBN:

This study examines how financial disclosures made with earnings announcements affect analysts' information about future earnings, focusing on disclosures of financial statements and management earnings forecasts. We find that disclosures of balance sheets and segment data are associated with an increase in the degree to which analysts' forecasts of upcoming quarterly earnings are based on private information. Further analyses show that balance sheet disclosures are associated with an increase in the precision of both analysts' common and private information, segment disclosures are associated with an increase in analysts' private information, and management earnings forecast disclosures are associated with an increase in analysts' common information. These results are consistent with analysts processing balance sheet and segment disclosures into new private information regarding near-term earnings. Additional analysis of conference calls shows that balance sheet, segment, and management earnings forecast disclosures are all associated with more discussion related to these items in the questions-and-answers section of conference calls, consistent with analysts playing an information interpretation role with respect to these disclosures.

The Value of Analyst Forecast Revisions

The Value of Analyst Forecast Revisions
Author: Kanyuan Huang
Publisher:
Total Pages: 60
Release: 2022
Genre:
ISBN:

This paper examines the information contained in analyst forecast revisions following earnings announcements. I find that sorting firms on aggregated forecast revisions generates a much stronger post-earnings-announcement drift than sorting on measures of earnings surprises. The strong association between aggregated forecast revisions and post-earnings-announcement returns is driven by the subsample of firms with large-magnitude earnings surprises. This result is consistent with analysts' roles in interpreting corporate earnings. Further, the mispricing is the strongest when forecast revisions contradict earnings surprises, suggesting investors have difficulties in processing contradictory signals. Lastly, I document aggregated forecast revisions are more informative when the information environment around earnings announcements is more opaque, when firms have high accruals and when investors do not pay attention to the firm. They are less informative when analysts disagree with each other. Overall, these results point to the value of analyst forecast revisions following earnings announcements.

Analysts' Earnings Forecast Revision Around Industry Member Firms' Earnings Announcement

Analysts' Earnings Forecast Revision Around Industry Member Firms' Earnings Announcement
Author: Steve C. Lim
Publisher:
Total Pages:
Release: 2014
Genre:
ISBN:

This study examines: (1) whether earnings announcements by industry member firms trigger analysts to revise their forecasts of other member firms' soon-to-be-released contemporaneous earnings and (2) how the revision is related to forecast bias and the announcing firms' earnings news. The forecast revision on a nonannouncing firm is measured as the change in analyst forecasts of its quarterly earnings immediately before and after an announcing firm's earnings release date. We find that analysts revise forecasts on the nonannouncing sample firms consistently in direction with the signs of the announcing firms' unexpected earnings. The evidence, however, is pronounced only for downward, not upward, revisions and for quarters in which the announcers fail to meet analysts' expectations. The findings suggest that a member firm's earnings announcement is a timely source of information for analysts to revise their preceding forecasts of other member firms' contemporaneous earnings. They also suggest that the forecast revision is not symmetric in direction and varies with announcing firms' actual earnings news.

Post-Earnings Announcement Drift

Post-Earnings Announcement Drift
Author: Tomas Tomcany
Publisher: LAP Lambert Academic Publishing
Total Pages: 92
Release: 2010-11
Genre:
ISBN: 9783843367813

It is a well documented finding in finance theory that share prices drift in the direction of firms' unexpected earnings changes, a phenomenom known as post-earnings announcement drift, or earnings momentum. In this book, I study the stock prices' reaction to firms' quarterly earnings announcements. The book shows that the timeframe in which the drift occurs is related to the size of a firm and is limited in time after the earnings announcement. I further analyze the effect of the number of analysts covering a firm on the magnitude and persistance of post-earnings announcement drift. I document that recent analyst coverage predicts large drifts after the earnings announcements. I suggest several possible explanations, but the evidence seems most consistent with recent analyst coverage providing information about investor (or analyst) expectations regarding firm's future earnings. This book should be useful to professionals in Financial Economics, especially to those interested in Behavioral Finance in stock markets, but also to equity analysts, traders or investors interested in the stocks' response to earnings news.

The Stock Price Effects of Changes in Dispersion of Investor Beliefs during Earnings Announcements

The Stock Price Effects of Changes in Dispersion of Investor Beliefs during Earnings Announcements
Author: Lynn L. Rees
Publisher:
Total Pages: 51
Release: 2008
Genre:
ISBN:

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.

Management Earnings Forecasts and Value of Analyst Forecast Revisions

Management Earnings Forecasts and Value of Analyst Forecast Revisions
Author: Yongtae Kim
Publisher:
Total Pages: 45
Release: 2014
Genre:
ISBN:

This study examines the stock-price reactions to analyst forecast revisions around earnings announcements to test whether pre-announcement forecasts reflect analysts' private information or piggybacking on confounding events and news. We find that management earnings forecasts influence the timing and precision of analyst forecasts. More importantly, evidence suggests that prior studies' finding of weaker (stronger) stock-price responses to forecast revisions in the period immediately after (before) the prior-quarter earnings announcement disappears once management earnings forecasts are controlled for. To the extent that management earnings forecasts are public disclosures, our results suggest that the importance of analysts' information discovery role documented in prior studies is likely to be overstated.

Financial Analysts? Earnings Forecast Dispersion and Intraday Stock Price Variability Around Quarterly Earnings Announcements

Financial Analysts? Earnings Forecast Dispersion and Intraday Stock Price Variability Around Quarterly Earnings Announcements
Author: Samuel S. Tung
Publisher:
Total Pages: 28
Release: 2020
Genre:
ISBN:

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.